Return of the Swine Flu: Part 2

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Ryan Cole, The Investment U Research Team

- Profiting from Protection from Swine Flu

In Part 1 of this series, I discussed why the swine flu is about to come back, stronger than ever. In this part, I’d like to tell you what I’ll be doing about it.

First, I’m stockpiling some good masks, because we’re going to run out – supply isn’t anywhere close to satisfying demand, even in a regular flu season.

Throw in a large scale public panic… and you see the problem.

Next, when flu season comes around, I’m washing my hands after touching just about anything, and I’ll probably avoid crowded, closed spaces for a bit.

But that’s just what I’m doing about my health, here’s what I’m doing financially…

I’m thinking about how to make money here, not because of some morbid fascination – after all, even with all the scary stats above, the swine flu is unlikely to reach its deadliest potential, and we’re still unlikely to have a Spanish flu, redux – not least of all because our medicine is so much better now.

But one thing I can assure you – we will act to prevent the worst from happening. And that action can make smart investors a lot of money.

The obvious play is vaccines. Novartis (NYSE: NVS), GlaxoSmithKline (NYSE: GSK), and Sanofi-Aventis (NYSE: SNY) are the solid plays here, with orders already pouring in from governments around the globe.

All received a bump when the WHO declared the swine flu a pandemic, but they’ve leveled off since. Don’t let that deter you – as we approach flu season, and the orders start to get filled, investors will remember who’s making money out of this scare.

You also might want to consider 3M (NYSE: MMM), the makers of the N95 mask, considered the best (and perhaps the only cheap, easily available protective mask that will prove useful against the virus). Again, even if there’s not another single case of swine flu, you can bet cautious folks will be buying out the stock of N95s this winter.

Finally, there are two plays that you should keep an eye on – but certainly not act on yet. One – investing in pork.

If the swine flu pandemic hits big, we’ll see a massive culling of pigs. This is a bit risky – some folks won’t want to eat pork, out of fear, even though you can’t catch the flu from eating pig meat – but, even if demand is suppressed, supply is likely to collapse. And, given the global nature of this pandemic, the supply might be down for years, with few breeding pairs remaining.

Mid-term, investing in pork could be a real winner, depending how this thing goes.

And, finally, I’m going to watch carefully businesses dependent on large numbers of people working in close proximity.

We just saw school closings. In similar scares, we often have factory closings. And, if it looks like that might happen, I’m going to start shorting manufacturers. The swine flu is going to hurt production badly, even if we only have a bad scare or two. And, with the economy as precarious as it is now, a scare or two might be enough to turn back any gains the economy is making on this recession.

Regardless, you need to keep your eye on this flu, and the government reactions to it. There are a few things – like vaccine orders and preventative masks – that we know will flourish without doubt. There are some others – like pork futures and manufacturing productivity – that could easily be hit hard, if we get a scare or two.

And, if manufacturing gets kicked now, while it’s already down, watch out below. The flu doesn’t need to kill many to create another, killer pandemic – this one economic.

I’ll be watching closely, and I suggest you do the same.

Good investing,

Ryan Cole