Short seller Jim Chanos warned investors about piling into “virus stocks” boosted by the coronavirus lockdown temporarily.
“One area I would warn people about for example is the virus stocks,” Chanos said on Thursday on CNBC’s Halftime Report. They are “doing well right now in this enforced lockdown. A lot of these companies are really not structurally growth stocks that are trading at 30, 40, 50 times earnings because they are going to do well in the first and second quarters of 2020.”
The founder of Kynikos Associates listed Zoom Video, Teladoc, Peloton and Clorox as companies getting a lift from the stay-at-home trend amid the coronavirus pandemic. Shares of Zoom Video and Teladoc soared 85% and 94% this year respectively on a surge in demand, while Clorox gained more than 15%.
“Of course when the virus subsides, and we all know it will, those companies will probably begin to not look as attractive going forward,” Chanos said. “I would tell your viewers to be very, very careful about just piling into things that are doing well because people are inside and will stay inside for the next three, four, five weeks.”
These companies are acting “contracyclical” due to the implementation and persistence of social distancing practices, Chanos said. The short seller added he’s not betting against Zoom Video or Teladoc.
“Look at the business and look at 2019. Take an educated guess, do your research and do your work and what you think this looks like in 2021. If it’s still a cheap stock then, then it might be an attractive investment on the long side,” Chanos said.
“You have to write off 2020 and I think the market is and will ultimately,” Chanos said.
President Donald Trump has extended national social-distancing guidelines to April 30 as coronavirus cases in the U.S. showed no signs of peaking. Many states across the country including New York, New Jersey, California and Washington are limiting residents’ movements to curb the virus’ spread.
Chanos also said on Thursday he just closed a bet against Chinese coffee chain Luckin. Luckin Coffee is down more than 70% on Thursday after it revealed that its chief operating officer fabricated 2019 sales.
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