Back in January, the Wuhan coronavirus (as it was called at the time) was a small concern for the markets. Investors were keeping an eye on it, but compared to other geopolitical factors at the time, it was largely an afterthought.
Fast-forward to March and the reality of COVID-19 is still settling in. Markets, health services, and politicians are all struggling as the coronavirus outbreak continues to grow in scope and fear, with none the wiser as to whether the full impact will be relatively calm or worse than expected.
Alongside the fall of the markets at large, investors are starting to seriously consider their correction investment strategies. A large part of the strategy is to stay safe, calm, and diversified, but another key factor for many investors on the Stockhouse Bullboards is to gauge which companies will be able to recover, and when.
This week, we highlight two sides of the impact the markets have faced so far, by looking at the most-viewed companies in resources and healthcare.
The energy sector has had a rough go from the COVID-19 outbreak, as crude prices have dropped below US $50/barrel and brought producers along with them. Far and away the most-viewed company on the energy Bullboards was Canadian producer
Vermilion Energy Inc. (
TSX:VET,
Forum), which was one of the hardest hit. VET closed at $19.00 on Feb. 20 before dropping and hitting $13.46 on Feb. 28.
While other producers fell as well, Vermillion took a bigger blow. One of the reasons seems to be that analysts are already concerned for the company’s
upcoming year end earnings set to be released tomorrow, and the company’s
$0.23/share cash dividend is looking increasingly unsustainable in the current market.
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The VET Bullboard has been trying to make its own predictions for the earnings report and debating back and forth on the severity of the coronavirus. As Stockhouse Member
WheresMeGold has pointed out, however, the realness of the virus combined with the “hype” of the outbreak are self-fulfilling negative drivers on oil, regardless of accuracy.
“...The media hype and scaremongering is getting ridiculous. This is not some of supervirus that stays with you forever, pops back up after you are cured (there are reasons why it appears so but I’m not getting into that), or other doomsday scenarios out there. However, it is serious. It requires attention and resources. But proper perspective has been lost.
The level of disruption to commerce and travel will continue to be severe and worsening. With the hype it’s likely going to be worse than even I imagined. I argued China’s GDP would contract in Q1 because of this when others were arguing the growth would only be slightly less. I see this weekend the first acknowledgement of what I said. Unfortunately I think global GDP will drop more than people expect.
Deflationary effects are going to worsen, and yes oil will bear the worst of this. The virus is serious but the overhype is even worse and self-fulfilling.”
(Post: My nuanced views on coronavirus)
On the other side of the market, the coronavirus impact on healthcare stocks has largely been either positive or non-existent. Rapidly rising up the healthcare Bullboard ranks is SaaS healthcare tech provider
Reliq Health Technologies Inc. (
TSX-V:RHT,
Forum), which was previously listed on the Stockhouse Technology Bullboards.
RHT shares did drop slightly with the broad market at first, from $0.59 on Feb. 21 to $0.48 on Feb. 25, but a wave of
partnership and
new contractannouncements brought the stock back up to $0.60 on Mar. 2. After ending the week on a positive note, however, the company released a
quarterly statement with reduced revenue guidance and an operational refocus, bringing shares down to $0.455.
Users on the RHT Bullboard largely agree that the short-term outlook is not looking rosy for the company, with higher than expected expenditures keeping it cashflow negative. But deciphering the long-term implications of the new partnerships and revenue guidance is a lot more tricky. To some, the increase in revenues will need to ramp up significantly more than is being anticipated, but for Stockhouse Members like
Takeactionnow, the market is severely underestimating the impact the new contracts will have down the line.
“...It is not so much that Lisa miscalculated, but that the circumstances changed. With opportunities to land three major new contracts (provided that she dedicated sufficient resources to the effort) Lisa turned her attention (and that of her staff) away from Texas, temporarily. Would investors prefer that she have met onboarding numbers but have no new contracts?...”
While energy stocks were hit hard by the coronavirus selloff, the impact on mining companies has been varied. Initially many producers fell, but fear-based selling leads to higher gold prices, and many gold producers benefited. For investors interested in junior miners like
Harte Gold Corp. (
TSX:HRT,
Forum), that meant COVID-19 was less at play than the company’s natural performance.
Unfortunately for Harte Gold, the recent trend has been downwards. HRT shares have gone from $0.175 at the start of Feb. to $0.12 at the end of the month, and though there was a brief uptick in the first day of March alongside the rest of the sector, it seems to have been short-lived. The company has been making many changes to try and recover, including an
executive management change and a
private placement for $27 million.
Are the changes enough to right the ship for the HRT Bullboard faithful? There’s definitely a lot of questions remaining, especially as to how Harte Gold will be using the money in the most effective way possible. Given the current market situation, there’s a consensus that the time isn’t ripe for huge news releases and clarification, so all users like Stockhouse Member
justrelax2 can do is dig deep with what info they have.
“...$27 million for ‘Eligible Development’ not ‘Exploration’ according to the last NR. Corporate presentation has $18 million or so planned for ‘Development,’ that has got to be underground development of stopes and such. The quicker we get to our high grade, the better. All costs will benefit from high grade. Current drilling has probably been paid for by Echelon's flow through from last year...”
Despite the craziness gripping the markets over the past week, there was a lot of hype and attendance at the Prospectors and Developers Convention in Toronto. We’ve been asking what mining commodities investors are interested in buying for Q1, and the response has been overwhelming. At first things were skewed more evenly, but as COVID-19 started taking its toll, investors went back to precious metals.
And our new poll asks the question on everyone’s minds: When will we put the coronavirus outbreak in the rearview mirror? Some experts and politicians seem to think it’s sooner, while other health experts are expecting things to get worse, and the markets are in for a ride no matter what. When do you think the coronavirus impact on the markets will wear off? Make sure to head to the
Stockhouse homepage or click the image below to cast your vote!
(Click image to go to the poll)
This week we’ve had emergency rate cuts from federal banks, continuing outbreaks of COVID-19, and markets reacting to every piece of news. Who knows what next week will bring, and which stocks will survive and thrive? For previous editions of Buzz on the Bullboards:
click here.