“Pump and Dump” – Bird Flu Get-Rich-Quick Schemes Target the Unwary
US securities regulator NASD has issued an investor alert, “Bird Flu Stock Scam Could Be Hazardous To Your Financial Health”:
The threat of bird flu is fueling stock scams touting large gains from companies that claim to be poised to capitalize on helping the world avoid a global pandemic. NASD is issuing this Alert to warn investors that fax and email investment scams may come your way trumpeting the promise of large gains for companies with products and services aimed at fighting bird flu.
One fax claimed its company "has the solution for tracking and containing the Bird Flu virus in turn preventing it from spreading." Citing the enormous cost of fighting avian flu, the fax stated the stock was "positioned to gain 250% or more." The fax went on to urge investors not to miss out on a stock that was "clearly missed by Wall Street."
In a press release coinciding with the alert, NASD Vice President of Investor Education John Gannon said: "This is an age-old pump-and-dump scheme with a brand new disguise. Unfortunately, fraudsters are quick to exploit every new crisis or catastrophe to peddle their get-rich-quick scams to unsuspecting investors."
December 29th, 2005
Making Your Blood Go Cold
The global investment firm Citigroup has issued a bird flu report for Australian investors, recommending that in the event of a pandemic they sell shares in companies that depend on people gathering in public places - such as shopping centre operator Westfield, casino owner PBL and betting shop operator Tabcorp – and in airlines and tourism companies. These should be replaced by the shares of companies that will benefit if people are forced to stay at home, such as phone companies, media companies and transportation companies.
The report allows The Australian newspaper to indulge in some business bashing. Under the headline “Outcry Over Bird Flu Hit List” it publishes the comments of a “business ethicist,” John Sweeney:
"This makes your blood go cold," said Mr Sweeney, leader of the Edmund Rice Business Ethics Initiative. Mr Sweeney also said that market behaviour may need to be regulated in the event of a bird flu pandemic.
The newspaper also quotes a fund manager:
James Thier, who oversees a $380 million portfolio at Australian Ethical Investment, said Citigroup should have kept its advice to "positive stocks" like vaccine makers and pathology. "These people are looking at avian flu and saying that these are potential winners for us. They are looking at the negative side," Mr Thier said. "But this needs to be approached from a positive perspective rather than saying, 'How can we profit from millions of deaths?'."
December 1st, 2005
If Symptoms Persist, Consult Your Stockbroker
Britain’s The Observer newspaper provides bird flu investment guidance, under the headline, “Bird flu: if symptoms persist, consult your stockbroker…”
Research from the global portfolio strategists at giant American finance house Citigroup sums it up in a nutshell - sell British Airways and BP, buy Blockbuster and Nintendo. The lesson is that in the case of a serious outbreak, we will be too frightened to leave our homes.
….On the other hand, the best case scenario leads to a temporary blip - the markets hate uncertainty - but this is, in fact, a buying opportunity, just as happened during the Asian SARS crisis three years ago. Buy telecoms, internet and, of course, drugs companies. “While it is difficult to quantify the likelihood of a human pandemic, our analysis suggests avian flu is a rising risk to the global economic outlook,” says the report.
Or in other words: first see your doctor, then get a second opinion from your stockbroker.
November 21st 2005
Up and Down
Shares in bird flu companies Roche Holding and its Japanese partner Chugai Pharmaceutical fell yesterday after reports that Tamiflu – made by Roche – might have caused two Japanese teenage boys to commit suicide. Roche has said there is no clear evidence that the drug was responsible.
But shares in Avant Immunotherapeutics soared more than 10% on news that it is developing a bird flu vaccine.
Also developing a vaccine is the Russian Flu Research Center, according to the Novosti news agency. It believes it could be ready for commercial production by February or March next year. Just one problem – not enough money.
November 15th, 2005
Hot Stock
Shares in Rockeby Biomed, a tiny Singapore-based company listed on the Australian Stock Exchange, have rocketed on the announcement that it has international distribution rights to two new tests for bird flu. Company management claimed to be surprised by the market reaction.
November 9th, 2005
Flu Shot Long Shots
Forbes magazine reports on four small biotech stocks that could soar in the event of a bird flu pandemic. They are AVI BioPharma, BioCryst Pharmaceuticals, Novavax and Sinovac Biotech.
November 1st, 2005
Chiron Analysis
The Motley Fool investor website contains an analysis of Chiron, following the award to the company of a $62.5 million contract to supply bird flu vaccine. The report also mentions other stocks, all well-known to investors – GlaxoSmithKline (which is a Motley Fool recommendation), Sanofi-Aventis and Gilead Sciences. Motley Fool also mentions Chiron’s distributor, Henry Schein.
October 29th, 2005
Novavax Shares Surge
Business Week reports that shares in biotech company Novavax jumped 33% yesterday, following a 10% rise on Monday, on the potential for the company’s vaccine, which reportedly protects animals against avian flu. The shares, which dipped to 70 cents in August, are now trading at $5.53.
October 26th, 2005
Biota – The Little Aussie Bird Flu Battler
A couple of months ago you could have bought Biota Holdings shares for around 50 cents. Last week they hit $2.60.
The reason – bird flu.
For Biota is the pharmaceuticals company behind Relenza (the marketing name for zanamivir), the ground-breaking anti-viral drug that is rated second only to Tamiflu in ability to fight bird flu.
Biota has its headquarters near Monash University, a 15-minute drive down Blackburn Road from my home here in the Eastern suburbs of Melbourne....continue reading Biota – The Little Aussie Bird Flu Battler.
October 25th, 2005
The Flu-Resistant Investment Portfolio
Reuters presents “ways to make investment portfolios at least partly flu resistant”. Here are some of the suggestions:
"People are not going to be congregating where other people are. So I would think that eBay Inc. and companies that sell on-line would probably do very well because people just aren't going to go to the mall to do shopping," said Jim Huguet, president and co-CEO of Great Companies LLC. Huguet also suggested companies that make home entertainment equipment and video games could benefit from a stay-at-home mentality. "It sounds gruesome but I guess you could invest in the funeral services companies. Obviously they would see a significant increase in business," added Huguet, mentioning Stewart Enterprises and Service Corp International.
If flu vaccines are to be produced the conventional way, a potential beneficiary could be egg producers, such as Cal-Maine Foods, noted Steve Brozak, president of WBB Securities….Should the worst case scenario pan out and a survivalist bunker mentality take hold, suggested Brozak, with tongue in cheek, "the best bets may be canned goods and shotgun shells."
Thomas Lydon, president of Global Trends Investments…said "hard currency or precious metals are the safe areas. In protecting yourself, maybe gold makes sense." That sentiment was echoed by Peter Schiff, President of Euro Pacific Capital, especially if Asia is the epicenter of a flu crisis as predicted. "Asia is where everything is getting produced. If Asia was less productive they'd ask for their money back from the United States and the result could be a selling-off of the dollar," Schiff said. "Gold should do well. If the dollar goes down, gold goes up automatically," Schiff added.
October 25th, 2005
Stock Market News
The Associated Press reports:
Shares of Quidel Corp. jumped Friday after the medical test maker said its QuickVue flu test not only showed high rates of accuracy in a recent study but can also detect the virus that causes avian flu….The company said an Australian study of its 10-minute QuickVue Influenza A+B test over the continent's summer flu season accurately diagnosed the presence of Type A flu virus 96 percent of the time and the absence of flu virus 97 percent of the time. In an earlier study conducted in Hong Kong and Japan, the test was shown to be able to detect the H5N1 virus.
October 22nd, 2005
Investor’s Guide to Bird Flu
MSN Money has presented an investor’s guide to bird flu, with a list of “flu” stocks and details on each. They are: Crucell, Novavax, Gilead Sciences, Roche, Biota, GlaxoSmithKline, BioCryst Pharmaceuticals, AIM Global Health Care Fund, Sanofi-Aventis, MedImmune, Acambis, Chiron and Novartis.
October 20th, 2005
Looking for Profits in Bird Flu
Reuters features an article on currency traders and their outlook on how a bird flu panic might affect currency movements. The main points:
"Speculators are already looking at this," said Craig Russell, senior foreign exchange dealer at Alaron FX in Chicago. "Negative news is a chance to make a profit. People will short the currency." Shorting is where an investor borrows a currency and sells it, betting he will be able to profit by repaying the loan with currency bought at a lower price….
The expectation is for an initial knee-jerk reaction in the currency of a country where any human epidemic breaks out, but that afterwards the currencies of countries most dependent on international trade and travel would be hit hardest. "I can't imagine it's good for any currency but the Aussie and kiwi dollars bear the brunt of global risk events," said Michael Jansen, currency strategist at National Australia Bank in New York. Investors see the fortunes of the Australian and New Zealand dollars as sensitive to even slight changes in global economic growth as they are commodity-based currencies, whose economies are heavily reliant on international trade….
"Since it is impossible to predict when and with what magnitude such a pandemic would hit, the only thing that would be fairly certain is that the market would experience increased volatility until the uncertainty of the situation wore off," said Global Forex Trading chief currency dealer Kurt Hoeksema….
If a bird flu virus were to infect significant proportions of the global population even safe-haven currencies and securities like the Swiss franc and U.S. Treasury bonds might come under pressure, analysts said. Then "we could potentially see an outflow from currency markets and into commodities such as gold for a short period of time as they could potentially be viewed as a currency substitute/store of value," said George Davis, chief technical analyst at RBC Capital Markets in Toronto.
The Motley Fool investor website also carries a report (registration – which is free – is required) on stocks that could benefit. They are Roche Holdings, Gilead Sciences, Biota Holdings, GlaxoSmithKline and Sanofi-Aventis. No surprises there.
October 18th, 2005
Bird Flu and the Stock Market
The Wall Street Journal has presented an investor’s guide to stocks that might benefit from their exposure to bird flu. The obvious name is, of course, Swiss company Roche Holdings, which makes Tamiflu, and whose shares have climbed 15% in three months. However, the article has put the spotlight on the small Australian company Biota Holdings, which makes the anti-viral drug Relenza. Biota shares have quadrupled in three months. Two other companies involved in bird flu vaccine developments are Sanofi-Aventis SA and Chiron Corporation. Also mentioned in the article is Gilead Sciences, which developed Tamiflu with Roche. Finally, the article highlights Korean kimchi (hot pickled cabbage) manufacturer Pulmuone. Some reports suggest that kimchi might help ward off flu infections.
October 14th, 2005
