Vaccine volatility – what have investors done?

Today was a monumental day on the markets. Pfizer announced that its Covid-19 vaccine has been found to be 90% effective, comfortably the most important scientific breakthrough thus far in the fight against the virus.

Now, your immediate reaction might be to buy Pfizer shares. Funnily enough, at time of writing, Pfizer was only up 6% after the news. That pales in comparison to the gains (and losses) seen in other sectors.

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Is the end of lockdown in sight?

Well, not yet.

For one thing, Pfizer is still testing the vaccine. It could still fall over. There are numerous unanswered questions around the effectiveness against severe cases etc. However, it’s a huge step in the right direction.

From a timing perspective, Pfizer (and vaccine partner BioNTech) hope to achieve emergency authorisation, which could see vaccines available in the US by the end of the year or in early 2021. It will be months after that before South Africa has access to vaccines.

So, the end is in sight, but we aren’t there yet. Even if all goes to plan, vaccines are still some months away on a global scale.

Where does this leave Aspen?

Aspen has a vaccine manufacturing deal with Johnson & Johnson, as written about previously on The Finance Ghost. Although Pfizer seems to be further along the vaccine development road than Johnson & Johnson, not all is lost for Aspen shareholders, with the share price up over 4.5% on the day.

There is space for more than one vaccine, particularly given the need to vaccinate practically the entire world. No single provider will be able to manufacture vaccines quickly enough. If anything, the news from Pfizer is probably good for all potential vaccine manufacturers, as it suggests that a vaccine may be possible.

Investors have dumped gold

Safe-haven asset gold has now lost its shine, as investors rotate out of gold and into other industries that will benefit from a recovery. At time of writing, gold itself is down nearly -4.5%.

Coupled with a stronger Rand, which makes the ZAR gold price even worse than the USD gold price, South African gold shares were sent into a tailspin: Harmony Gold (-16.3%), Goldfields (-15.5%) and DRDGOLD (-15.1%) are examples of gold shares that hurt investors after the vaccine news.

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Tech has taken a knock, especially stay-at-home stocks

After a strong rally in response to the US election news, tech stocks cooled off after the vaccine news.

Among the FAANG stocks, Netflix took the nastiest drop as an obvious “stay-at-home” stock that benefitted from lockdown, down over 4% in early trade in the US. I’ve written before that I’m not invested in Netflix for various reasons, so the next 12 months or so will quickly reveal whether Netflix really is a platform powerhouse or just another media company pretending to justify a platform valuation.

Among the biggest losers was Zoom, down 16.5%. The share price is still wildly up since January (over 500% higher) but I can’t help but feel that Zoom’s market saturation point was reached during lockdown. Surely most consumers in Zoom’s target market have already used the app?

Zoom was trading at a ridiculous multiple and could prove to be an expensive mistake for many investors who got in too late. Time will tell.

Sasol, go you good thing!

I’ve made it clear this year that I’m bullish about a Sasol recovery. I’ve been holding for months now, sweating through incredible volatility in the stock.

Sasol jumped over 23% on the news of the vaccine, because the end of lockdown would mean the return in demand for oil on a grand scale. Now trading at over R112 per share, I’m well-pleased with my average in-price of R46 per share.

Travel stocks finally get a break

I invested in American Airlines, Carnival Corporation (a cruise operator) and TripAdvisor earlier this year. All 3 sat for months in the red but investing in a turnaround is about being patient. In fact, investing in general is about being patient.

TripAdvisor jumped 18.2%, American Airlines 14.5% and Carnival Corporation a whopping 34.5% in response to the news. Good things come to those who wait.

What about the Rand?

The beleaguered Rand emerged battered and bruised to try fight another round. Things have taken a turn for the better for our poor currency, now trading below R15.50 to the USD. The “risk-on” trade is underway, a concept explained previously on The Finance Ghost.

It’s all good and well to benefit from improved global sentiment, but let’s wait for the next speech from Tito Mboweni before we get too excited. Whilst a vaccine would of course assist with our recovery, the damage has been done and South Africa is in a tough spot economically.

I personally don’t believe we will stay below R16 sustainably, but currencies are notoriously difficult to call correctly. I’m buying USD as quickly as I can at the moment. My bigger challenge is figuring out what to invest in on the other side.

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