By Judy Loy
Registered Investment Advisor, ChFC® and CEO of Nestlerode & Loy, Inc.
Finally, some good news in 2020. The Steelers are still undefeated as of this writing (sorry, not sorry—born in Pittsburgh and that black and gold gets in the blood), two pharmaceuticals are reporting successful COVID-19 vaccine results and the election is over (well, everything but the lawsuits). The stock markets are reacting favorably, although I do not think the Steelers’ record has anything to do with it.
Pfizer (PFE) has completed its vaccine trial and the vaccinations are 95 percent effective with no serious side effects. The important thing to know is it works for older adults, who are more vulnerable and do not respond to all vaccines. The downside is the vaccine requires storage at minus 94 degrees Fahrenheit, causing a run on dry ice. Pfizer stock price jumped up on the news but still has not recovered to its 2018 highs.
Moderna (MRNA) also has a vaccine in trials that looks to be 94.5% effective with no significant safety concerns. The vaccine worked well on the older population, which was 37% of the trial subjects. After the announcement, Moderna shares were up 10% in trading on Monday. The low for the year was $11 and the stock recently made an all-time high of $103.20. If safety data holds up, their vaccine could be approved in December 2020.
To put the vaccines’ success in perspective, Dr. Anthony Fauci said a 70-75% efficacy would have been satisfactory. Moderna has a contract with the U.S. for 100 million doses through Operation Warp Speed (OK, who came up with that name?). Pfizer’s trials are farther ahead than Moderna’s and they have a better distribution chain. Pfizer plans on asking for authorization within days to distribute their vaccine by the end of 2020 if health regulators permit.
Anything and everything that would benefit from a return to ‘normal’ are making upward movement. For instance, since the vaccine announcements, Marriott International (MAR) broke out of a trading range to the upside from $103.89 as of the close on Nov. 6 to $122.39 as of midday Tuesday, Nov. 17. Marriott has weak near-term prospects due to the lack of travel during COVID-19, and during the pandemic, Marriott halted its dividend and stock buybacks.
Carnival Corporation (CCL) has 104 ships under nine brands operating across the world, including Carnival Cruise Line and Princess (known to me from “The Love Boat.”) Carnival is the largest company in the cruise industry and was hit hard by the pandemic. The question remains if the shift in consumer behavior will be a longer-term change. The cost of higher cleanliness standards and discounts to lure passengers back are headwinds to recover through 2021. After the vaccine announcements, Carnival’s stock moved from $13.82 to close on Tuesday of $18.05. Even with a sharp recovery, the stock was still 65% off its highs and its low for the year was $7.80.
Sysco (SYY) is probably not the Cisco (CSCO) you are thinking about. Sysco “sells, markets and distributes food and non-food products to restaurants, healthcare and educational facilities, lodging establishments and other consumers around the world.” Given the hard-hit restaurant and lodging industry during the pandemic, Sysco fell considerably. It was able to retain its dividend given its diversification and the increased demand for cleaning supplies. Its low in 2020 was $26 dollars per share and it now has reached $74.23 as of the close on Tuesday and is only 13.7% off its highs for the year.
Walt Disney Company (DIS) hit a low in late March of $79.07 due to closures of its theme parks and cruise line. Blockbuster Disney movies were unable to show at closed movie theaters. Again, its diversification helped. It retained its dividend and recovered more quickly than other damaged stocks. Disney’s streaming service, Disney+, surpassed 60 million subscribers in July 2020, which the company predicted it would reach in 2024. When you have millions staying home with not much to do, streaming services helped. The stock recovered to $144, close to the high hit in late 2019.
Just as the start of the pandemic led to the success of some stocks, Zoom Video (ZM) being an obvious choice, the “return to normal” will have a similar effect in the opposite direction. I believe there will always be cloud computing, working from home and video conferences; they will be used as supplements to in-person meetings, office work and on-site servers. COVID-19 changed things very quickly for many industries and its effect will be felt for years to come.
**Nothing contained in this article should be interpreted as a promise or guarantee of earnings or investment results nor a recommendation for the purchase or sale of any security or sector.