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Swine Flu Could Mean Healthy Trades


Which stocks are posting gains on fear?

Before we short travel and hospitality stocks or go long in face masks, let's take a minute to recall the great swine flu epidemic of 1976.

It didn't happen.

But many of the same factors that ginned up fears 33 years ago may be in play today, starting with politics and a news media prone to hysterics.

President Obama won't risk his lofty approval ratings on a bunch of sick pigs in Mexico, especially after President Bush took a pounding for the federal government's slow response to Hurricane Katrina in 2005.

But let's not go, ahem, whole hog on this one – at least just yet. The situation looked ominous in 1976, too.

This time, the new strain of the virus has killed 152 people in Mexico and sickened about 2,000. The World Health Organization has raised its alert level.

The virus appears to be spreading in the US, with cases in New York (28), California (13), Texas (6), Kansas (2), Indiana (1) and Ohio (1). The virus has been detected in Israel and New Zealand. Possible cases have been reported in Australia, France, Germany, Norway, South Korea and Sweden.

Reduced airline traffic could be as bad as the 2003 SARS scare, but in early trading Tuesday, Delta (DAL), JetBlue (JBLU), Southwest (LUV) and American (AMR) had posted gains.

The virus is spread by human-to-human contact - not by eating pork products, but China and Russia nevertheless banned the import of US pork. That could be bad news for food processors such as Hormel (HRL) and Smithfield (SFD), but the stocks were up in mid-day trading Tuesday.

Fears of a pandemic could undercut the hotel business, but in mid-day trading Tuesday Marriott (MAR) had posted a gain, while Choice Hotels International (CHH) and InterContinental Hotels (IHG) were down slightly.

Swine flu fears boosted shares of Novavax (NVAX), a company few investors know. Last summer, the company announced that its experimental vaccine against a strain of avian flu produced a strong immune response in humans. The company says its technology can cut the time needed to produce a new vaccine by 50%. On Tuesday, the stock climbed about 15.3% in mid-day trading to $2.94 a share. It gained as much as 173% to $3.88 a share on Monday before retreating at the close.

BioCryst Pharmaceuticals (BCRX) also got a boost, but Pure Bioscience (PURE) and Generex Biotechnology (GNBT) on Tuesday gave back earlier gains.

The flu virus appears to be spreading, but so far hysteria hasn't followed the news.
No positions in stocks mentioned.
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