Coronavirus Vaccines: How To Profit By Proxy

Coronavirus Vaccines: How To Profit By Proxy
Reda Farran, CFA

about 3 years ago4 mins

Mentioned in story

What’s going on here?

Emergency approvals of various COVID vaccines appear to have been a boon for the share prices of the companies developing them, as shown in the chart below. With the race now on to roll those rubber-stamped jabs out to billions of people around the planet, however, a number of less obvious ways for investors to play the coronavirus response are cropping up. I’ve got my eyes on a few particularly interesting companies throughout the entire supply chain of producing, transporting, storing, and administering the vaccines.

Pharma stocks have risen post-vaccines

What does this mean?

Distributing billions of doses of inoculation is no mean feat – one air industry executive has called it the “largest and most complex logistical exercise ever”. That’s because the process involves hundreds of firms, from truckers to test-tube producers, as well as a massive workforce collaborating to get shots off laboratory floors and into the arms of the world’s citizens.

Every link in this global supply chain stands to benefit. What’s more, we still don’t know the length of the immunity provided by the vaccines – it’s still unclear whether acquiring coronavirus protection will be a one-off job or a yearly jab. If the latter turns out to be true, then the companies involved could accordingly be in for a regular booster to their earnings rather than just a temporary benefit. With all this in mind, let’s look at a few specific areas.

🥶 Cold storage

As things stand, all of the leading vaccine candidates need some degree of cooling, with Pfizer’s shot – the only jab actually being administered in the UK and US – requiring particularly chilly minus 70°C (minus 94°F) conditions. That’s going to drive huge demand for cold storage facilities, ironically making shares of companies offering industrial solutions a hot bet.

South Korean freezer firms Daihan Scientific and IlShin Biobase have both seen their stock prices rise by more than 300% over the past few months, accelerating on last week’s announcement that the Korean government has ordered 44 million supercooled doses of the Pfizer vaccine. Elsewhere in Asia, shares of Japanese freezer box maker Twinbird are up more than 250% this year – while India’s largest cold transportation specialist, Snowman Logistics, is up over 40%.

In Germany, shares of a little-known firm called Va-Q-Tec soared 84% last month. The business has signed an agreement to supply thermal vaccine containers for an unnamed “top global pharmaceuticals company” – three guesses who that might be. In the US, meanwhile, potential cold-storage beneficiaries identified by investment bank Citigroup include Trane Technologies and Carrier Global.

Cold storage firms' stocks have also risen

🚚 Transport

Keeping vaccines cold is one thing, but getting them where they need to go is a whole different ball game. Shifting billions of doses all over the world is a huge task which requires established operations. Large delivery companies like FedEx and UPS – both of which are currently adding new facilities and refrigerated trucks – are among the few able to handle this sort of demand. New truck orders, however, could benefit specialist truck makers such as Paccar, Navistar International, and CNH Industrial. Airlines’ cargo businesses may also benefit from moving the vaccine around internationally, but it’s unclear whether that’ll be sufficient to offset still-steep declines in passenger traffic.

💼 Administration

People won’t be jabbing themselves. In the US, several giant pharmacy chains such as Walgreens Boots Alliance and CVS Health recently saw their share prices rise more than 20% on news that they’d be partnering with the government to administer shots. In fact, investment bank Morgan Stanley sees an $8.5 billion sales opportunity for “last-mile” distributors and suppliers, with one company in this bucket being pharmaceutical middleman McKesson. And don’t forget that the vaccine needs to be kept in special glass and plastic vials. Shares of Gerresheimer – a German maker of just such vials – are up over 30% in 2020.

🏭 Manufacturing suppliers and partners

The last category of companies to consider are the chemical manufacturing suppliers and partners of the pharma firms actually developing the vaccines. Some of Pfizer’s suppliers, for instance, include Croda International, Aarti Industries, and Suven Life Sciences. As for Moderna’s rival vaccine, shares of its production partner Lonza Group have risen over 50% this year.

Why should I care?

While many of the firms named here will have much of the potential valuation uplift associated with their role in the inoculation rollout already “priced in”, opportunities remain for canny investors willing to do a bit of digging into the next scientific breakthrough or big logistics contract award.

Avoiding the hype associated with headline-grabbing twists in the pharma firms’ own competing vaccine development – and focusing instead on the ancillary benefits that accrue to companies involved in the broader vaccine supply chain – could leave you, like them, more likely to profit from the response to coronavirus while also doing your bit to fund the good fight. Now that’s a healthy return.

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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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