Traders who bought Virgin Galactic move on to ‘plague stocks’

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Richard Branson, founder of Virgin Group Ltd., speaks during an interview following Virgin Galactic Holdings Inc.’s initial public offering (IPO) on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Oct. 28, 2019.

Michael Nagle | Bloomberg | Getty Images

Traders who rushed to buy Virgin Galactic in its February boom are moving into stocks that could benefit from the coronavirus.

The high-growth space travel stock — the most traded name on SoFi Invest last week — is losing its appeal for millennial traders on the platform. Virgin Galactic saw net selling this week thanks to “people taking gains,” according to SoFi. Virgin Galactic shares have dropped more than 33% in the past week.

Instead, the start-up said its majority millennial traders are buying “plague stocks,” or names that benefit from the worsening coronavirus outbreak.

Drug-developer Moderna saw 100 times its usual buying activity on the SoFi trading platform. For Lakeland Industries, a protective clothing provider, it was more than 10 times its usual purchase history. Vir Biotech experienced 50 times normal levels, while Co-Diagnostics — which soared 57% on hope of a coronavirus test — had 20 times its normal activity.

U.S. stocks tumbled this week as fears of the virus and its possible economic impact weighed on investor sentiment. World Health Organization officials said Friday they are increasing the risk assessment of the coronavirus to “very high” across the world. The disease has spread to at least 49 countries in a matter of weeks.

Wall Street’s so-called fear gauge, the Cboe Volatility Index, hit its highest level since February 2018. The TVIX exchange-traded note was also one of the top trades on SoFi this week.

On the passive, “robo” investing side, SoFi said customers shifted from “aggressive” to “moderately aggressive” with people proactively changing their strategies more than usual. SoFi has about 200,000 traders on its platform with an average age of 25 to 40 years old.

Despite the change of tone on SoFi, Robinhood traders were still overwhelming interested in Virgin Galactic.

The stock-trading start-up, which announced in December it has 10 million users, said Virgin Galactic was the top bought and sold name on the platform this week. Microsoft was second on the list of top-bought stocks this week, followed by Plug Power, Tesla and Ford. Tesla was also toward the top of the sell list.

SoFi’s retail investors aren’t giving up on Tesla either. It was still a top-traded stock on SoFi Invest in recent weeks.

Retail platform E-Trade saw a “significant increase in equity volume this week” with Apple and T-Mobile among the top on the sell list thanks to some “profit taking.”

“In terms of selling activity — quite frankly, it’s a flurry of individual stock stories rather than a broader trend,” said Chris Larkin, senior vice president of E-Trade’s brokerage product. “At a high level, it’s been a buy-the-dip mentality with interest in names like F and AMD.”

Randy Frederick, Charles Schwab’s vice president of trading and derivatives, said trading behavior on the platform largely mirrors what happened in the broader market. High-flying consumer discretionary and tech sectors were among the hardest hit.

2020-02-28 18:33:12

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