News of faster-than-expected positive results in the search for a COVID-19 vaccine is the topic of the week. If we can get a vaccine out as soon as this fall, then we may not see the total collapse of some threatened industries.
Even better, some of the best stocks will surge higher once investors know the virus threat is in the rearview mirror.
The economy will still experience a recession, but a vaccine could eliminate the possibility of a longer-lasting full-blown depression.
U.S. Biotech company Moderna Inc. (NASDAQ: MRNA) reported this week that its vaccines produced antibodies in human subjects and kept the virus that causes COVID-19 from replicating in mouse lungs.
While Moderna has faced scrutiny since its announcement, its CEO said this morning that a vaccine is possible by the end of the year.
Partnerships are being formed throughout the pharmaceutical and biotech industries to speed up the development and distribution of a coronavirus vaccine.
Fall is a best-case scenario, but it is far better than the mid-2021 best-case targets for vaccine delivery that were being discussed earlier in the crisis.
Some of the economy and stock market segments that have been decimated by the pandemic will come roaring back once a vaccine is widely available. Even though many of these hard-hit stocks have jumped this week, they have a long way to go before they reach last year’s high watermarks.
Travel will come roaring back when a vaccine allows the economy to function at full speed. Some cruise lines are reporting strong bookings for cruises in late 2020 and into 2021.
The Walt Disney Co. (NYSE: DIS) is shooting to reopen its theme parks on July 1. People like to travel and love their vacations, after all.
That’s why these three stocks will shoot higher as soon as the virus is credibly contained. If you’re confident we’ll get a vaccine sooner or later, then these are the stocks to stock up on right now…
Best Stocks to Buy Before a Vaccine, No. 3
Online travel agency Expedia Group Inc. (NASDAQ: EXPE) had turned to private equity for cash to keep the business running.
Silver Lake and Apollo Global teamed up to invest $1.2 billion in Expedia back in April. Expedia also sold $2 billion of new debt in the range of 6% to 7% to further bolster its balance sheet.
Expedia leaped higher on the announcements of a possible vaccine, but the company is still trading way below its 52-week high. The stock would have to rise by 80% to match that level.
A normalized economy has a much higher probability of happening than anyone thought a few weeks ago. And when a vaccine is found, EXPE should start racing back to pre-COVID valuation levels.
Best Stocks to Buy Before a Vaccine, No. 2
Liberty Tripadvisor Holdings Inc. (NASDAQ: LTRPA), part of John Malones Liberty Media Group, also turned toward private equity for a lifeline during the pandemic.
The company accepted an investment of $325 million for private equity funds managed by Certares Management to pay off a margin loan.
Liberty Tripadvisor has been hard-hit with its stock falling by more than 80% in the past year.
To get back to the 52 weeks, the shares of the beaten-down travel services company would have to increase five times.
But Liberty Trip Advisor is the world’s largest travel platform. So, a return to normal would lead to huge gains in the stock price. A 500% or more increase is possible.
Upper-end hotel and resort stocks should also experience significant rebounds once a vaccine is available. While many have bounced significantly this week, many of the stocks have to double or more in value to reach pre-pandemic levels.
And our top stock that will go up after the coronavirus threat is over could give you 200% gains…
Best Stocks to Buy Before a Vaccine, No. 1
Park Hotels & Resorts Inc. (NYSE: PK) is the second-largest hotel REIT.
Park has 60 premium-branded hotels and resorts with over 33,000 rooms primarily located in the prime city center and resort locations.
Unfortunately, the company had to close 38 of its 60 hotels due to disruption from COVID-19 this year. And it has operated at 15% capacity since the spread of the virus accelerated across the United States.
Park has taken drastic measures to shore up the balance sheet by reducing costs by 75% across the board. Management drew down their entire $1 billion line of credit and used a little over $105 million to pay the April dividend to shareholders. That still leaves the business with over $1 billion in unrestricted cash to survive the crisis.
If a vaccine arrives sooner than most had hoped, travelers will flock back to Park’s high-end resorts and hotels in places like Hawaii, Key West, and Orlando. Prime business locations like San Francisco and New York will reopen demand for higher-end downtown hotels will return to former levels as well.
PK shares currently trade at a third of the high price in January. But it is a best-in-class operator and has plenty of cash on hand to get back up and running.
In an economy that is operating at 2020 levels, I expect Park Hotel & Resorts shares will triple to reach the old highs in a relatively short period.
— Garrett Baldwin
Source: Money Morning