The pig flu is scaring the wits out of travelers across the globe. While a handful of companies are enjoying surging share prices today, the biggest winners will be the news networks that are blowing the whole thing out of proportion.

This is not what a timid, cautious market needs as it works to heel from the wounds of a wicked leveraged correction. Fortunately, as with most media-hyped fears, the swine flu “pandemic” will be short lived.

In the meantime, traders will have their hands full picking the speculative winners from the losers. So far, the stocks investing are trading the most are no big surprise.

Just as they do every time the word flu creeps into a headline, shares of Novavax (NASDAQ:NVAX) are soaring today. Investors lucky enough to be holding shares last week, are now sitting on shares worth 150% more than they were trading for on Friday. Options traders are making plans for retirement as their positions soar multifold.

But even after this morning’s surge, shares have to more than triple in value to reach the peak levels of the bird-flu scare in 2006. You can view that as more upside potential, or look at it the way I do and realize the gains will not be long-lived.

Investing fever

Novavax, while it does not sell any cure-all pills or a vaccine to prevent the spread of the swine flu, does have the biotechnology to quickly uncover the recipe for a new vaccine. By grabbing shares of the tiny $100 million ($50 million last week) company, you are speculating the flu will grow to pandemic proportions and large doses of vaccines will be needed.

If that never happens, the future cash flows investors were betting on will dissolve and share price will natural drop back to last week’s levels.

If you are not willing to flat-out gamble on the situation, you will likely want to turn to companies like Gilead Sciences (NASDAQ:GILD), the creator of Tamiflu or Switzerland’s Roche, who is currently paying a royalty to Gilead for the right to sell Tamiflu. Or you can invest in GlaxoSmithKline (NYSE:GSK) and its Tamiflu competitor, Relenza.

Over the weekend, global health officials gave permission to tap into reserve stockpiles of Tamiflu and start using up to three million treatments as needed. Hopefully, the world will not need the entire amount as it could take Roche up to eight months to scale up its current production and put large amounts new packages of the flu-fighting tablets on the market.

Overall, Roche is expected to earn somewhere in the neighborhood of $400 million if it is called to restock current piles of Tamiflu. That means about $70 million in royalties could flow to Gilead, not a windfall by any stretch of the imagination for a $40 billion company.

If you do not already own shares of any of these companies, today is not the day to be doing it. Novavax could be a winning play if you time your moves exactly right, but the other handful of companies getting attention from the news will likely give up their gains as quickly as they came.

Until the headlines and the 24-hour news networks start talking about massive amounts of casualties and not a few folks with a high fever and weaker-than-normal stomach flu, this story is pure speculation and is not for traders that cannot tolerate ultra-high risk.

If you really want to make some money on the situation, buy a couple of pigs on the cheap. You’ll be able to fatten them up and sell them for a premium when this whole thing blows over.

Source: Swine flu: Investing in a Sick Pig