28 Apr Testing Positive for Future Profits
The curve is flattening. The shutdown phase of the pandemic is almost over. States are taking steps towards re-opening.
But for a complete re-open to occur we need one vital factor. Testing. That is why Trump announced a new law yesterday to provide $25billion to expand testing.
Now we have a handle on stopping the virus expanding, to keep our citizens safe, we need to be able to test to make sure we don’t get a second spike. But even if you test negative once, you might need to be tested again a month later. The need for testing cannot be underestimated
Think about the sporting codes. If we tested all players every week then there is no reason we could not have games between negative result players.
Testing is the real key to getting our world back to some kind of normalcy.
The good news for investors is there is only handful of businesses that have the expertise to deliver high quality tests.
According to the New York Times, the Centre for Disease Control acknowledges that some tests are giving uncomfortably high rates of false negatives, meaning a test comes back negative when the patient does in fact have the virus. Chinese research published at MedRxiv states the same thing.
The other factor is scale. Which companies will be able to produce accurate tests on a scale large enough to be worthwhile?
We are talking about millions of tests daily in the US. It will start with essential public-facing workers like first responders, healthcare workers and grocery deliveries, and then the large corporates will wade in, demanding their employees get tested prior to returning to work so they can be seen as good corporate citizens and taking care of their workforce.
The demand will outstrip supply and prices for access to kits will increase.
Andrew Cuomo, governor of New York, announced that he is authorising 5,000 independent pharmacies to collect tests. He also committed to on-demand testing for all essential workers within New York, even if they do not have any symptoms.
Testing, testing, testing. It is all you are going to hear in the media and before long you yourself might very well end up experiencing a test.
The good news is, we have identified the top two companies set to benefit from this next phase of the virus
We have written about LabCorp (LH) previously. You can read our original post here. Yesterday Citibank upgraded Labcorp to a ‘buy’ citing lab testing is poised to be part of the coronavirus solution.
Even though this stock has been a solid performer for us, it is well within buy range but you will need to act fast as we doubt it will stay at these prices for long.
The second winner for testing is Danaher (DHR)
Danaher owns Cepheid which won emergency approval from the FDA for its Covid-19 test. Their test can provide an on site result within 45 minutes. This is a game changer and will be a cash machine for Danaher for these machines are already installed in 5,000 American hospitals.
Danaher is much more than just virus testing. It is a globally diversified conglomerate with four major segments. Life Sciences, Environmental, Applied Materials and Diagnostics.
The company is built around lean manufacturing principles. A lean, integrated conglomerate has better profit margins. It also has strong supply chains which are vital in crisis.
Danaher shares are up 10% in 2020 but this is just the start for this company at the forefront of the fight against coronavirus. Buy today.
Employees and Associates of Capital 19 own the stocks mentioned in this report and have not been paid for writing the material.