By Michael Brush
Virus experts like Anthony Fauci were hoping for at least a 50%-60% reduction in symptoms from the Pfizer /zigman2/quotes/202877789/composite PFE -2.37% and BioNTech /zigman2/quotes/214419716/composite BNTX +2.36% vaccine. So the 90% reduction in symptoms was a slam dunk — and welcome news all around.
Obviously, it’s great news for people in high-risk groups who want to avoid severe health problems from the virus, or worse. But the high efficacy is also good for investors. It suggests a return to normal is in sight — and more gains lie ahead for the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.28% and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.29% . “This is a nearly unmitigated win,” says Cowen pharma analyst Steve Scala.
Pfizer may apply for emergency use authorization (EUA) from the Food and Drug Administration by the third week in November. Former FDA chief Scott Gottlieb estimates it will take the FDA two to four weeks to review the data and issue an EUA.
If approved, Pfizer could have 50 million doses out this year, plus another 1.3 billion doses in 2021, says Cowen biotech analyst Yaron Werber.
While the vaccine does not prevent infection, a big reduction in symptoms will shorten hospital stays sharply. This is good news at a time when hospitalization rates are up sharply off the mid-September lows — and back up to record levels seen in July.
The excellent symptom reduction rate also suggests we could hit all-important herd immunity if 60% of people get the vaccine, calculates Deutsche Bank analyst Robin Winkler. “This should be feasible over the course of 2021.”
Next, the Pfizer data suggest more vaccine results will land very soon. Pfizer reported results on the basis of 94 cases. This infection rate suggesting that Moderna /zigman2/quotes/205619834/composite MRNA -1.73% and AstraZeneca /zigman2/quotes/200304487/composite AZN -3.60% /zigman2/quotes/203048482/delayed UK:AZN -4.98% have also neared critical mass on case counts and could be “much closer to reporting preliminary results than the market has been assuming,” says Winkler.
The list of winners doesn’t stop here. The results are a big endorsement of messenger RNA (mRNA) vaccine technology, says Jefferies biotech analyst Michael Yee. “This is a home run for mRNA-based technology,” he says.
These vaccines work by inserting an mRNA strand into cells, spurring them to produce antigens that trigger the immune system to combat a virus. RNA vaccines are faster and cheaper to produce, and probably safer, than attenuated virus vaccines.
The Pfizer results also suggest that Moderna’s mRNA vaccine efforts will pan out. “They are similar in terms of how the vaccine triggers neutralizing antibodies. So, I’d expect Moderna to have positive results as well,” says Jing He, a biotech analyst at Gabelli Funds.
Since March, I have been very bullish on cyclical names, and what I call “public-space stocks.” Why? We knew that sooner or later there would likely be vaccines. Meanwhile, the Federal Reserve and Washington, D.C. have pumped record levels of stimulus into the economy, notes Leuthold Group strategist Jim Paulsen.
The upshot: By next June we could be in economic melt-up mode. Stocks most sensitive to the economic cycle do well in this environment, and also when economies transition into rapid growth from recessions.
The eight stocks I put in my public-gathering-place portfolio in my stock newsletter on March 17 were up 101% by the close on Nov. 9, compared with 40% gains for the SPDR S&P 500 ETF Trust /zigman2/quotes/209901640/composite SPY +0.42% . I suggest continuing to hold these names if you own them, or adding on significant weakness.
The eight stocks are: Churchill Downs /zigman2/quotes/205054336/composite CHDN +1.78% , Royal Caribbean Cruises /zigman2/quotes/208854639/composite RCL -0.46% , Carnival /zigman2/quotes/202325446/composite CCL -1.25% /zigman2/quotes/210414141/delayed UK:CCL -7.66% , Planet Fitness /zigman2/quotes/203234487/composite PLNT +1.73% , Lowe’s /zigman2/quotes/205563664/composite LOW +3.26% , Home Depot /zigman2/quotes/208081807/composite HD +4.21% , Howard Hughes /zigman2/quotes/206056706/composite HHC -0.76% and Cedar Fair /zigman2/quotes/205497488/composite FUN +0.79% .
The reason: Many doubters remain on the sideline. A Pfizer vaccine by year-end would be a game changer for investor sentiment, says Emmanuel Cau, Barclays head of European equity strategy. “We expect the reflation trade to gather speed and broaden out.”