04/07/2006 12:00 am EST
Keith Fitz-Geraldis certainly no scaremonger. Rather, he is an exceptional advisor with a safety-first focus on defensive portfolio management and hedging his risks. Recognizing the risks of a bird flu pandemic, he offers several very high risk ideas.
"A bird flu pandemic is capable of snowballing across the world in short order. My major concern is that all it’s going to take is a single mutated virus to jump from one human to another, and we’ve got a massive problem on our hands. To put this into perspective, in 1918 the Spanish Flu killed some 50 million people worldwide. Adjusting for current population, we could be looking at 150 million fatalities, or roughly 2% of the world’s population. That’s like a modern version of the Black Plague that ravaged Europe in the Middle Ages.
"The obvious implications are significant and very real if this strain of H5N1 proves as deadly as some scientists think it will be. To call it a global depression would be an understatement. In our portfolio planning we have built a solid defense in the face of a potentially devastating global pandemic, through a diverse range of bonds and stocks designed to buffer this reaction. And while it may seem macabre, we also see a speculative opportunity in certain areas that would benefit from a pandemic.
"So where might opportunity lie? How about medical supplies? In the past, I’ve talked about the ‘picks and shovels strategy’, and that’s what we’re going after in this case. These three ideas are all high risk ‘Boomers and Zoomers’, and each one is a pick-and-shovel play. I emphasize that they’re all highly speculative and I want to be especially diligent in my advice. Don’t bet the farm on any of them. One percent of your total portfolio value for each as a hedge ought to do the trick if a pandemic comes our way. Buy ’em and throw away the keys. If we lose, we lose, but I don’t think that’s the case here.
"Emergency Filtration Products (EMFP OTC BB) makes what many infectious disease professionals say is the best face mask of its kind. Why? Respirators within their masks filter out at least 95% of airborne particles. The filters in the mask are sprayed with the nano-particles, which penetrate the cell wall of bacteria and viruses, and kill them. Distributors of the NanoMask say that with every report of bird flu concerns, sales spike.
"EMFP opened a new facility in Las Vegas, recently, where they hope to make more than seven million filters. As the first stage of its production ramps up, EMFP expects be able to assemble up to 50,000 masks and 200,000 nano-enhanced filters per week. Buy this speculation for no more than $2.00 a share, then tuck it away. This small emerging company will be volatile. But if the bird flu hits like I think it will, EMFP should run to $5 or even $10 a share.
"Alpha Pro Tech(APT ASE) is also in the mask-making business, but its core growth focuses on distributing any and all health supplies used by hospitals, i.e. beds, gowns, lab coats, etc. Alpha Pro Tech has increased revenues from $300,000 in 1991 to $21 million in 2001, with a CAGR of 53%. It currently yields a gross margin greater than 40%. It’s still a tiny company, but one that’s making all the right moves.
"APT is relied upon as a key supplier to some of the biggest names in the pharmaceutical and semiconductor sectors. Buy this Boomer & Zoomer for less than $3.25 a share. Like EMFP, Alpha Pro Tech is a tiny company and will likely be very volatile. Then again, so will the markets in general if I’m even partially correct in what I’ve laid out. Expect it to at least double in the next 24 months.
"Beijing-based Sinovac Biotech (SVA ASE) is a biopharmaceutical company with a track record for developing effective vaccines, and the backing of the Chinese government. Sinovac is currently the world leader in the development of a SARS vaccine. It entered clinical trials for its SARS vaccine at least two years ahead of its competition. Now, it is co-developing a human vaccine targeting the avian flu virus in partnership with China’s equivalent of the CDC, and with the push by China’s government, I expect it to beat many of its competitors to the starting gate.
"Sinovac expects its first study to take nine months, though preliminary results are to be made available in March. The trial includes 120 healthy volunteers between the ages of 18 and 60. The company said it has already given the vaccine to six volunteers at a hospital in Beijing. Sinovac projects that its sales figures may reach approximately $40 million by 2007. Buy this high risk play for no more than $4.25, and look for a move to at least $8 within 12 months."
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