Last week we wrote about using Sentieo to stay on top of fast-moving developments and the impact on the auto industry. With the big market selloff on Monday, February 24, 2020, we looked for companies that are actually up for the day to get clues as to what sectors might be outperforming the likely volatile markets in the next few weeks.
As expected, some of the “the usual suspects” were in the green on a day in which the S&P 500 was down 3.35% and the Nasdaq was down 3.71%, including pharma and consumer staples. However, there were also some unusual suspects which were indicative of the trends we’re starting to see as a result of the Coronavirus’ spread across the globe.
Pharma a Standout Performer
In the first group, we had several pharma companies that might benefit from the rush by health authorities globally to repurpose existing substances or develop new solutions. The largest one, Gilead, has dramatically outperformed the sector (using the S&P 500 Healthcare ETF XLV as a proxy) since the spike in Twitter mentions of Coronavirus in late January (in green below). This also coincided with search interest spike (in dark blue). The market optimism centers around remdesivir.
The company itself though downplayed the agent during the conference call on February 4th, 2020.
Gold in the Green
In the next group, we had gold-related equities in the green as the yellow metal was up over 0.6%. The big four gold royalty/streaming companies, Wheaton Precious Metals, Franco Nevada Gold, Royal Gold and Sandstorm Gold, continued their strong run of relative performance against an already strong performance by gold itself.
Coronavirus Fears Drive Confidence in Bleach
Another industry group where we saw “green” was consumer staples: Clorox (wipes and bleach!), Lamb Weston (frozen potato product), Nomad Foods (frozen seafood), Campbell Soup (canned soup), and Hostess Brands (Twinkies and Ding Dongs, among others). This is consistent with what we have seen around spikes in volatility (in green below): the XLP (S&P 500 Staples ETF) does better than the broad market SPY (stock price ratio in red below).
Other outperformers were companies with profitability associated with trading volumes and volatility: CME Group, MarketAxess Holdings, and Virtu Financial. For example, VIRT announced their results earlier in February, and the lack of volatility (in the first sentence in the 8-K below) as the primary reason for its 8.8% decline in revenues.
Work from Home Driving the Markets
But then there was a group of companies that were green that did not fit in these “standard” buckets of “risk-off” plays. We spotted file management software Atlassian (TEAM), video conferencing provider Zoom Video Communications (ZM), remote healthcare access Teladoc Health (TDOC), exercise equipment and class provider Peloton (PTON), contact center 8×8 (EGHT) and similar names were up for the day. Slack (WORK), which we previously covered, was down for the day but doing better than the Nasdaq. As a SaaS leader ourselves, and as active users of some of these services, we realized that this is the “Work from Home” portfolio. We are witnessing the markets pricing around large-scale adoption of these names due to the coronavirus.
And we have another data point to prove it. The transcripts with mentions of “work from home” or “working from home” have skyrocketed this month to 65 so far: well above the prior monthly record of 11 back in April 2018.
We’re continuing to follow the trends around Coronavirus and the market’s reaction and will post updates as we have them. In the meantime, if you’d like to learn more about Sentieo, please get in touch at sentieo.com.