There's always a bright side.
In this case, for vaccine makers, $130Bn in unexpected revenues over the next 4 years and, as I noted back on Sept. 28th in "The Week Ahead – 3,350 is Critical for the S&P 500" and our corresponding Top Trade Alert, "Pfizer (PFE) made $16Bn last year and you can buy that whole company for $200Bn at $36 per share so just 12.5 times earnings… While Pfizer may not ultimately "win" the vaccine race, they are a solid blue-chip pharmacuetical company who are clearly able to keep up with the BioTechs WHILE making a healthy profit. Isn't that the kind of company we like to invest in?"
As you can see, PFE is going to generate $21Bn in additional revenues next year alone – a nice boost to their normal $50Bn in revenues and, while they may not make much profit selling their Covid vaccine next year (state of emergency regulations), they will make follow-on revenues for years to come. That's how PFE became our "value play" in the virus space.
The investing premise was simple, the others had gotten away already so we went long on PFE, which was lagging the rest of the sector – a horse no one believed would win the race but we made a place bet – simply betting our horse would finish the race and, even if it didn't, it was still a good horse and we'd run it in future races.
Johnson and Johnson (JNJ) was also sure to be in the running and is a good, reliable stock but, at $400Bn in market cap, it's twice the size of PFE and would then draw less net benefit from a new line of revenues. That's why PFE is up over 20% since late September and JNJ is only up 2.5%. You don't have to be psychic to predict the future of a stock – you just have to pay attention to trending condisions in the news and the markets and think about how that will impact their business down the road.
That's what our Top Trade Alerts are all about. Sound investing ideas that are not following the short-term trends – we're focused on the long-run and we generally make nice, sensible trades that aren't swinging fot the fences – but will still make very nice returns if they are successful.