The world has been anxiously waiting for a Covid-19 vaccine, so it’s no surprise that sentiment in stock markets turned quite optimistic in recent trading days. Last week, Pfizer announced that its experimental Covid-19 vaccine had proven effective, with more than 90% efficacy in preventing the disease. Moderna has also reported a vaccine that shows nearly 95% protection.
Since then, the FTSE 100 surged nearly 4% on the back of the vaccine news. And expectations that the pandemic will be beaten soon continue to set the tone for a bullish market.
And in my opinion, there might be a good reason for optimism. The stock market’s value is typically based on future expectations rather than past or present performance. The combination of a vaccine, the huge amount of money that was poured into the market during the previous year, and unprecedented near-zero interest rates policies around the world could be strong catalysts for further gains.
With that in mind, here are some companies that I have my eye one as I think they will most likely benefit from the release of a coronavirus vaccine.
Optimistic outlook for GlaxoSmithKline
GlaxoSmithKline (LSE: GSK) has dropped nearly 19% since the beginning of the year amid the coronavirus pandemic and I think that this stock is actually a bargain right now. Why? Well, GSK is a strong candidate in the race to develop an effective coronavirus vaccine. The pharmaceutical giant has recently announced the start of phase 2/3 clinical trials of its Covid-19 vaccine. More importantly, GSK has signed, along with French multinational pharmaceutical company Sanofi, a £2.1bn deal with the US government to supply 100m+ doses. In the UK, it has made a deal with the UK government to supply up to 60m doses too.
Whether its vaccine succeeds or not, I expect a post-pandemic world in which GSK’s shares can rise by around 25% to pre-Covid levels.
Airline industry recovery
It would be a waste of time to discuss the negative impact of Covid-19 on airlines. Clearly, the pandemic has had an enormous impact the likes of International Consolidated Airlines. IAG shares fell to their lowest levels since 2013 in May and again in August. However, since late October, the share price has gained more than 50%, climbing from 91p to around 158p at the time of writing, and the share price outlook remains positive. IAG is a major player in the airline industry with a market cap of more than £7bn and a strong balance sheet.When flights return to normal, I’m convinced that shares of IAG could rise further.
Lastly, I think another FTSE 100 stock that can outperform the market in the upcoming year is Whitbread. The company owns Premier Inn. Why has this stock has caught my attention? Whitbread was doing great before the pandemic, particularly following the sale of the Costa coffee chain to Coca-Cola for £3.9bn. But this year, the company’s shares fell sharply amid the lockdowns and the shutdown of the economy. Whitbread’s year-to-date return stands at -37%, largely due to a drop in sales caused by the pandemic. With that in mind, it’s currently trading at a fairly cheap price and if a Covid-19 vaccine comes out soon, I believe it’s one of the best long-term investments in the market right now. I’d buy.
The post Covid-19 vaccine: the 3 top stocks I’d buy right now appeared first on The Motley Fool UK.
Tom Chen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020