Should you still buy “Covid stocks”?

In today’s Exponential Investor…

  • You’re not too late
  • You’re not too late
  • You’re not too late

19 October 2020 I wrote to you and said,

… with every day this current pandemic goes on, we’re another day closer to it ending. When it ends, and it will end, will you have done all you can to put yourself in the right position for it? Or will you regret not doing more?

My view on this is that you have to take a positive approach to your investments now, more than possibly any other time before. As an example, I’ve not invested more into the market in such a short space of time as I’ve done since March this year.

For me, these conditions we’re in now are ripe for investment into companies that will outlive, outlast and outperform in the long term.

In that piece I also said,

… now is the most important time you will probably see for at least another decade to be taking a punt on the stocks that have been hit hard, but won’t die and could deliver huge windfalls over the next 12 to 24 months.

And then,

What if by Christmas there’s a vaccine, or something that dulls the impact of the virus, levelling it out as nothing worse than the normal flu?

When do you think these stocks will run then? And will you want to have been positioned in them, early, before the masses pile back in? Or would you want to compete with the bidding frenzies that will come when there’s a solution to all this?

The next day I then told you I’d specifically tell you about ten stocks that I think were ones to really give consideration to off the back of all this.

The ten stocks that have all gone BOOM

In that piece I said,

… I see there being nothing but rampant bounce-back capability as soon as we step beyond this. This is not something that will linger in the mind of the many more than a year or so.

It won’t last forever, it will end. Some people realise this, some don’t. I’m just trying to open your perspective to the realisation that maybe things aren’t that bad, and that maybe things will be significantly better a lot faster than most people can comprehend right now.

I then helped you identify three key sectors set for this bounce-back potential:

  • Aviation and transportation
  • Hospitality and leisure
  • Automotive.

And finally I identified ten stocks that investors should be looking at within each of these sectors:

  • easyJet (LSE:EZJ)
  • Rolls-Royce (LSE:RR)
  • IAG (LSE:IAG)
  • City Pub Group (LSE:CPC)
  • Mitchells & Butlers (LSE:MAB)
  • Marston’s (LSE:MARS)
  • Cineworld Group (LSE:CINE)
  • Vertu Motors (LSE:VTU)
  • Marshall Motor Holdings (LSE:MMH)
  • Aston Martin Lagonda (LSE:AML).

I bring all this up today as a bit of a “I told you so” moment. I don’t mean to be smug about it, but since we went into a lockdown in March for the first time I repeatedly said this market would be ripe for the picking.

I’ve repeatedly said to my colleagues at Southbank Investment Research for months now that we’re in the midst of a “punters paradise” for stocks on the UK market.

Sure, the economy is reeling, yes there was no certainty about whether we’d have another lockdown or not.

As it pans out, yes we have another lockdown – but even that seems to be predicated on false data.

And I consistently said that we would come out of all this a lot faster than people would realise. That means an investment opportunity the likes most people will never see again.

It was and still is a time to be active in the market. I genuinely believe that – that’s why I’ve been personally pumping as much into the UK market as I can since the first lockdown we had.

All it was going to take to spark the market back into life was the mass realisation that Covid-19 isn’t as bad as people believe it to be and that there is some kind of “appeasing catalyst” to calm everyone the heck down.

The Pfizer Factor

As it appears, that soothing catalyst is the announcement yesterday that Pfizer has found 90% effectiveness for its Covid-19 vaccine.

The CEO of Pfizer even made comment that he didn’t anticipate the vaccine would be 90% effective. He followed that up by saying,

I believe this is likely the most significant medical advance in the last 100 years, if you count the impact this will have in public health [and] global economy.

This catalyst has spread around the world like wildfire – and set the Covid-beaten stocks alight!

Those stocks above (at the time of writing) are all showing daily returns of:

  • easyJet (LSE:EZJ) – up 30%
  • Rolls-Royce (LSE:RR) – up 44%
  • IAG (LSE:IAG) – up 30%
  • City Pub Group (LSE:CPC) – up 26%
  • Mitchells & Butlers (LSE:MAB) – up 25%
  • Marston’s (LSE:MARS) – up 22%
  • Cineworld Group (LSE:CINE) – up 43%
  • Vertu Motors (LSE:VTU) – up 7%
  • Marshall Motor Holdings (LSE:MMH) – up 1%
  • Aston Martin Lagonda (LSE:AML) – up 10%.

Those are whopping single-day gains. They’ve all moved like this because of the Pfizer announcement and the market realisation that this Covid-19 drama isn’t going to last forever. Whether it ends naturally or because of a vaccine is somewhat irrelevant.

The facts are, it will end.

Now you might also look at these kinds of stocks and other Covid-beaten stocks and think to yourself, “Hmmm, maybe I’ve already missed the boat.”

The good news is, you haven’t. In fact, you can still play this idea and these industries in a way that still shows plenty of upside.

In tomorrow’s Exponential Investor, I’m going to explain exactly why it’s not too late, and how you can think about successfully playing this market bounce-back.

Until then,

Sam Volkering
Editor, Exponential Investor

Category: Commodities

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