American investment manager Jim Chanos warned investors not to invest in viral stocks that are rising amid the coronavirus pandemic.
In a CNBC interview, Chanos explained which stocks he calls “viral,” Markets Insider writes. They are Zoom’s video conferencing service, manufacturer of Peloton exercise bikes, and Clorox, a manufacturer of wipes and other disinfectants. It is the securities of these enterprises that are now “on top”.
“Many of these companies do not actually notice the growth of their shares in the conditions of economic stability. However, in the current conditions, their profitability will increase several dozen times. In particular, in the second quarter, as well as in the first, they will be popular,” Chanos said.
Due to the coronavirus pandemic, countries began closing borders, companies temporarily stopped working, and millions of people are forced to stay home to curb the spread of the disease. All these factors have led to a drop in the stock returns of many enterprises. In particular, Warren Buffett lost $ 5 billion on airline shares.
However, at the moment when the securities of some firms fall in price, the shares of others, on the contrary, become profitable in a pandemic. As of Thursday, April 2, Zoom shares rose 101%, and the medical company Teladoc – by 94%. Clorox securities increased in price by 14%.
“Of course, when the spread of the virus slows down, it is likely that the shares of these companies will not look as attractive as they are now,” says Jim Chanos.
The investment manager announced the closure of a short-term rate against Luckin Coffee, whose shares on Thursday, April 2, gained 80%. Such sharp growth occurred after it was discovered that the chief financial officer had fabricated sales results.
Interestingly: Central banks of the world sold more than $ 100 billion in US government bonds. World central banks sold more than $ 100 billion in US government bonds.
Chanos also noted that it is better for investors to postpone the purchase of so-called “viral stocks” until 2021 in order to look at the dynamics of their prices.
“You must cross out 2020. After all, in the end, the stock market is and will be,” Chanos added.
The trader also advised investors to review the performance of companies in whose shares they want to invest, for 2019.
“Conduct your own research. This will help to understand what can happen with stock prices in 2021. If they are not high, this can be an attractive investment for the long term,” the expert summed up.