The coronavirus pandemic has disrupted everyday life, altered the trajectory of the global economy, and reminded all of us not to be tricked by the thin veneer of civilization. For all of humanity's advanced technology, our best weapon against a fast-moving virus is to simply stay indoors and keep contact with others to a minimum.
While low-tech solutions can be pretty powerful against uncertainty, investors will gradually begin to chip away at the information gaps of the coronavirus pandemic. Can science provide answers and solutions before the end of 2020? How badly has the economy been damaged? How long will the economic recession last?
Partial answers to those questions will begin to emerge in April. That's why investors might want to keep a closer eye on electric utility holding company Xcel Energy (NASDAQ:XEL) and research and development collaborator Twist Bioscience (NASDAQ:TWST).
An early indicator for electric demand and industrial activity
Xcel Energy operates four electric utilities serving customers in the middle of the United States, from the Dakotas in the northern Midwest all the way through Colorado and down to West Texas. Assessing the health of the company's operations might prove useful for investors gauging electricity demand and industrial activity during the pandemic.
Consider that efforts to slow community transmission rates of the new coronavirus began in mid-March when cities, counties, and states began ordering Americans to stay indoors. As of the beginning of April, the great majority of Americans are under such decrees, which will last through the end of the month and likely into May (at the least). It's all bound to reshuffle electricity demand profiles.
Commercial (especially) and industrial activity has been significantly reduced, while residential energy usage has likely significantly increased. But investors don't have much reliable data yet describing the trend. Electricity sales might provide some of the first real insight.
In 2019, Xcel Energy generated 31% of its revenue from residential customers and another 53% from commercial and industrial customers. Those percentages are unlikely to hold in March, April, and May of 2020. What will that mean for other electric utilities? Can increased residential sales make up for decreased sales to other customers?
The company's usefulness to investors extends beyond eyeing differences in residential electricity use. Xcel Energy is the most prolific electricity supplier to oil and gas producers in the Permian Basin of West Texas, which is one of the most prolific oil patches on the planet. Investors already know that crude oil markets are cratering, but the company's next earnings report could shine more light on the severity of the downturn. The business is scheduled to report first-quarter 2020 operating results in the first week of May -- days or weeks before many oil and gas producers in the region.
The West Texas region has recently been one of the most important sources of earnings growth for Xcel Energy. Will oil production cuts hurt the dividend stock more than investors are expecting?
An under-the-radar technology platform
If Twist Bioscience is ever going to burst onto the scene and showcase the power of its technology platform to the world, the coronavirus pandemic might be the right time. The company is a leading provider of synthetic genetic materials. Another way to wrap your head around that: If Illumina reads DNA with its sequencing platform, then Twist Bioscience writes DNA with its synthesis platform.
To date, Twist Bioscience has sold synthetic DNA mostly to academic, biopharma, and industrial customers who use it in genetic engineering experiments and living technologies. The company's greatest success has actually come in an unrelated area: selling high-quality next-generation sequencing (NGS) tools to healthcare companies looking for more precision in their workflows.
This technology platform could prove an important tool in the race to understand the new SARS-CoV-2 coronavirus and the acute respiratory disease it causes.
For example, every diagnostic test used to confirm that an individual is infected with coronavirus requires a positive control sample -- usually a chunk of viral genetic material, or RNA -- to compare with patient samples. Doctors know the positive control is, well, positive for the virus, so if the patient sample provides a similar signal, then the patient is confirmed to have the virus. Twist Bioscience offers multiple SARS-CoV-2 RNA controls for such tests, and they are listed on the U.S. Food and Drug Administration (FDA) website as reference materials.
Twist Bioscience has also created NGS tools for scientists studying the new coronavirus outside of emergency medical settings; has partnered with Vanderbilt University to identify possible antibody therapeutics that could be used to treat COVID-19; and supplies genetic materials used in the DNA vaccine candidate against SARS-CoV-2 being developed by Inovio Pharmaceuticals (NASDAQ:INO).
That said, investors should be cautious. Twist Bioscience has seen its operating expenses grow faster than revenue in recent quarters. It's not immediately clear that the company's synthetic DNA sales are profitable, or that the coronavirus pandemic is lifting up the business (or making up for reduced business from other customers). But investors shouldn't be surprised if they hear more about Twist Bioscience in the coming weeks and months as a stealthy collaborator for the scientists and companies leading the charge against SARS-CoV-2.