Coronavirus may be a hidden blessing to Anavex (AVXL)
U.S. goods and services trade with China totaled an estimated $737.1 billion in 2018. Exports were $179.3 billion; imports were $557.9 billion. The U.S. goods and services trade deficit with China was $378.6 billion in 2018.
Simple terms, all that stopped 1 month ago, and roughly $62Billion in trade, (this month) is NOT happening.
If you read the business and social media reports (Reddit, facebook, etc.), U.S. importers and exporters are LOSING their MINDS and seeking secondary suppliers because their regular Chinese suppliers aren't so much as answering their emails. (They are on lockdown for 30days.) Even ali-express/ebay fulfillment departments have stopped.
U.S. manufacturers are therefore seeking secondary and tertiary options (India, Malaysia, etc.) but those suppliers are sub-standard and cannot accept new orders until Q3.
The long-story-long of this, is that Chinese MANUFACTURING and U.S. RETAIL is about to be butchered. Logistics will be collateral damage. God pray for you if you work in any of these departments.
What does this mean for AVXL?
It means that Q2 - after the manufacturing, retail, and logistics blood bath, financial institutions will seek refuge. Either a) remove all their funds (exhibited by a cash-and-hold act) sparking a recession, or the funds will seek safe refuge. Inflation will increase.
In an inflation-increase market....
Keep Cash in Money Market Funds or TIPS. ... <-- not effect
Avoid Long-term Fixed Income Investments. ... <--Anavex
Emphasize Growth in Equity Investments. ... <-- Anavex
Commodities Tend to Shine with Inflation. ... <-- false in this situation
Inflation is Usually Kind to Real Estate. ... <-- 50/50 due to people being unable to pay their rent/mortgage (this depends on how long the recession lasts)
Convert Adjustable-Rate Debt to Fixed-Rate. <-- Not Anavex
So... Markets will seek safe refuge in markets that will not be affected.
There will only be a few of them. RealEstate is not (because people need jobs to pay their rents/mortgages). Finance will be 50/50
Domestic Manufacturing will be crap, most domestic U.S. manufacturing has been mothballed since 2000.
Farming/food will maintain - exports will become domestic focused because Chinese exports have failed simply because there isn't anyone to man the docks. Chinese exports are (per ship logistics reports) at max 10% loaded.)
So shipping is also a bust (logistics).
As such, I've identified three markets that will likely flourish. Domestic farming, Artificial Intelligence, and Medical.
I won't discuss farming and AI, because that is another chapter for another day.
Medical is 2-part. One, the first failure, will be importers of medicine (90% of antibiotics and medicine is imported from CHINA) so any company whose finances are dependent on steady-stream medicine will be disrupted Q2.
Financial institutions will thus seek very niche markets.
Anavex may be that market - still in research phase, not dependent on revenue stream from medicine (because we simply aren't there yet) but able to 'activate' its economic engines post-coronavirus (Q3)
Holy shit guys and gals. We may have accidentally found ourselves sitting on a fund that a) novel treatment, b) not dependent on revenue, c) immune to the pending financial crisis, d) will benefit form asset relocation to mitigate losses from logistics/retail/manufacturing failures.
So hold on. It's about to be a pretty interesting Q2/Q3.
