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2006-05-23 :: Tuesday evening – W. H. O., Bird Flu & and You

The World Health Organization released information today about potential human to human bird flu transmission in Indonesia.  Several members of the same family have died from bird flu, including three who shared the same sleeping room.  Although they came up short of saying that  it was definitely human to human transmission, the implications seem to have scared the markets at the end of the day as much of the big gains from earlier were lost.  The Dow dropped by 28 points, although the oils and metals were mostly up, with the exception of aluminum and iron ore.

The bird flu story is a big one.  If human to human transmission is confirmed, this will be very bullish for gold and gold miners.  Before this story became front page news and we were seeing rumblings of it in The Economist and other publications, we started adding small postions to portfolios in gold miner Barrick Gold (ABX) and streetTracks Gold Shares (GLD) as insurance against some bigger event.  Luckily, this was also when gold was in the mid-$400’s per ounce and our insurance has paid off without any major crisis having occurred.   Additionally, we’ve added where feasible shares of Gilead Sciences (a biotech with a bird flu vaccine in the works) and Premium Standard Farms (PORK), a pork producer who would see their earnings rise as poultry gets shunned for other meat products in a bird flu scare. 

I’ve also been watching other other biotechs and pharmaceuticals that are working in this area, and in fact we owned Chiron for awhile in some accounts until they were purchased by Novartis.  Most of the companies are too small or illiquid for us to own safely in clients’ behalf.  However, if you are investing your own funds in an online account or in some other manner, there were two of these that skyrocketed ahead this afternoon on the news out of the WHO:  Novavax (NVAX) which was up almost 12% and Generex Biotech (GNBT) up just shy of 11%.  They might be worth your research efforts if you believe this bird flu human to human transmission story is more than presumption by the WHO.  We will likely be looking for an entry point into Novartis as an additional hedge against this potentiality.  It will also be a nice hedge against the dollar bear market as it is a Euro-based company whose ADR’s we buy here in the states.

As I write this, the Japanese market is up over 1%.  If Europe is up over night as well, maybe we can shake off the drop in the last hour of our market caused by the bird flu scare.  Oil touched above $72 per share based upon the hurricane predictions announced today, closing a bit below that.  Copper also closed above $3.60.  Even though the rally in the broader market stalled today, the sectors in which we are overwieght in client portoflios finished strong.  We’ll see if the broad market rally can shake off the bird flu news and rally for real tomorrow, while our favorites hopefully continue to move forward.  As for NASDAQ, it might be getting cheap enough for me to look at Google (GOOG); at a 1.26 PEG Ratio, its almost a value stock (I’m only half kidding).

Thanks for reading!

Mark