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Tracking the Coronavirus (COVID–19)

Nick Griffin

Munro Partners

As growth equity investors, our day job usually involves tracking down great companies that can win in areas of strong structural change. However, as absolute return investors, occasionally something comes along that forces us to take our head out of the company P&Ls to try and understand the risks associated with a large exogenous event. COVID-19 is clearly such an event.

Munro Partners has been tracking the Coronavirus daily since China confirmed the outbreak on January 20 in Wuhan Province. As an absolute return manager, we analyse the data and patterns to provide insight in terms of timing and ways to protect against the financial downside for our clients.

And we have noted a pattern.

Source: Worldometer, Munro Partners

Looking at our chart on confirmed COVID-19 cases by country, we can see a clear trend developing. Progression of confirmed cases by day (with t+0 at 100 cases on a country-by-country basis), we see that the rate of increasing cases (2nd derivatives) have an inflection point between 15 and 20 days. That is, from the time a country crosses 100 cases, it takes roughly 20 days to get the outbreak under control (new daily cases are less than the day before).

China Ex-Hubei is the longest test case with an inflection point at 20 days. While there were 127 cases at t+0 (1st point) increasing rapidly to 11,287 cases by t+20, a further 20 days later (t+40) there were “just” 1,784 new cases. A similar inflection point occurred in South Korea at t+17, whereby the daily number of new cases started to fall. While Italy is still experiencing rapid case increases to t+14, if South Korea and China Ex- Hubei is used as a reference point, we should expect to see an inflection point in new cases over the next week. That would be welcome good news. 

However, based on these patterns, we can also expect to see rapidly increasing cases in the larger economies of the US, France, Spain and Germany over the coming two weeks as they enter the peak period of expanding confirmed cases.

For equity markets, this creates we expect a difficult juxtaposition. Will the market look to China, South Korea and hopefully Italy as evidence that the virus will ultimately be contained; or will they look at increasing confirmed cases in G7 nations and deduce the economic fallout from this shock is expanding?

To be clear, there are obvious testing, climate and cultural differences between each country we track, with Singapore (warm climate) the obvious outlier, and we don’t profess to be medical experts as to how the virus may evolve. But from our point of view, we would make two observations. 

  1. The next few weeks will be crucial to containing the virus spread in developed economies and the economic fall-out could dramatically increase. And 
  2. This can be contained. Countries have done it already, and long term this should ultimately create a good opportunity for investors.

But in the meantime, stay safe.

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The material contained in this publication is being furnished for general information purposes only as is not investment advice of any nature. The information contained in this document reflects, as of the date of publication, the views of Munro Partners and sources believed by Munro Partners to be reliable. There can be no guarantee that any projection, forecast or opinion in these materials will be realised. The views expressed in this document may change at any time subsequent to the date of issue. This information has been prepared without taking account of the objectives, financial situation or needs of individuals. Before making an investment decision, investors should consider the appropriateness of this information, having regard to their own objectives, financial situation and needs. Past performance information given in this document is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. No representation or warranty is made concerning the accuracy of any data contained in this document.

Nick Griffin
Chief Investment Officer
Munro Partners

Nick is a founding Partner and the Chief Investment Officer of Munro Partners. He is responsible for the investment management of Munro’s key investment funds and the formulation and implementation of the proprietary investment process. Nick has...

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