The Coronavirus Crisis

Commentary2 years ago
How does the coronavirus outbreak impact your portfolio?
U.S. stocks fell sharply on Monday as the death toll of the coronavirus outbreak continues to rise and pressure grows on China's political leaders and its economy.
TLDR: we believe the impact of this coronavirus outbreak on your portfolio companies is small from a long-term investment perspective.
The health ramifications of the virus are obviously severe for anyone impacted, and they are a reason for greater caution during travel. That said, historical cases like these have generally presented great buying opportunities for long-term investors.
The latest information
The coronavirus outbreak is believed to have begun at a wholesale animal market in the central Chinese city of Wuhan (though some patients claim to have never visited the market)
This coronavirus, like SARS and MERS, "jumped the species barrier" to infect people on a large scale
The death toll now stands at ~80, with almost 2,800 cases confirmed across China and infections now reported outside of China too
Economic reactions to the outbreak have been swift (e.g., Chinese consumer spending already dropping, multi-national companies like Disney (DIS) closing locations out of precaution)
The CDC says the risk to Americans is low, but there's still a lot about the virus they don't know, hence they're preparing as if this is a pandemic
Why you're positioned well
Firstly, almost none of the Titan portfolio companies has material exposure to Chinese consumer spending.
Companies like Apple and Disney rely heavily on seasonal iPhone sales and theme parks in China, while Booking Holdings relies on global travel growth. Those companies could see earnings impact if the outbreak grows in scale and duration. The other 17 of your 20 companies, however, appear minimally impacted.
Second, looking at the history of the S&P 500 during pandemic outbreaks, we don't see any strong negative correlations. This suggests a widespread selloff in stocks could be short-lived.
Furthermore, the assumption that it's a pandemic as bad as, say SARS, may be a far too conservative one. The coronavirus outbreak is still ongoing, so it could be too early to tell, but thus far, it pales in comparison to the SARS outbreak in the early 2000s.
Finally, in the six weeks since this coronavirus has been tracked, ~80 people have died worldwide. In the same six weeks, over 80,000 people have predictably died of influenza (the flu). This is not a perfect comparison, but by order of magnitude, the data suggests the media may be sensationalizing the impact here.
To be clear, this is an extremely deadly virus that is not to be taken lightly as a consumer and global citizen. It's still ongoing and its ramifications could prove far worse than we've outlined above. Everyone should take precautions to stay safe.
However, if it's not an extreme outlier, the economic impact of the coronavirus could be far less negative than headlines suggest, based on the data above.
If that turns out to be the case, days like these could end up being opportune times to load up on high-quality companies.

Become a Titan investor today.

Titan Global Capital Management USA, Inc ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.
Refer to Titan's Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Brokerage services are provided to Titan Clients by Apex Clearing, an SEC registered broker-dealer and member FINRA/SIPC. For more information, see our disclosures. Contact: 110 Greene Street, Suite 910, New York, NY 10012. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.
© Copyright 2021 Titan Global Capital Management USA, Inc. All Rights Reserved.