Was yesterday’s announcement from drugs firms Pfizer and BioNTech a game-changer? The companies reckon preliminary analysis indicates their coronavirus vaccine is likely to be 90% effective. And judging by the reaction of the stock market, everything has changed.
The pent-up potential is shown by shares shooting up
Indeed, well-known names such as Whitbread, British Land, Taylor Wimpey, Lloyds and Burberry shot up by robust single-digit and double-digit percentages. And those moves reflected in the main indices such as the UK’s FTSE 100 and America’s S&P 500.
Meanwhile, England’s chief medical officer, Professor Chris Whitty, Tweeted the news is “very encouraging” and it “demonstrates the power of science against Covid.” He reckons the world needs to continue to suppress Covid, but the news is a “reason for optimism in 2021.”
And I reckon the response of the stock market yesterday demonstrates the pent-up potential in individual stocks. In many cases, the underlying businesses are labouring under the weight of the pandemic. I reckon yesterday’s rocketing share prices are an early indicator of how many enterprises will likely thrive when Covid-19 recedes.
So, I think the strength in the markets yesterday underlines why it’s been a good idea for me to look for decent businesses selling at lower prices. Indeed, the potential behind many businesses will likely make them decent long-term investments. However, I’d be careful about chasing share prices higher now after they’ve risen so quickly. After all, we may still have a long distance to travel with the disease hanging over us.
Sticking to a disciplined strategy
But sticking to a disciplined strategy of hunting for shares showing quality and value characteristics is still a good idea, I reckon. With a long-term investment horizon in mind, it’s a timeless strategy. However, I’d be cautious about getting caught up in the current market euphoria.
Indeed, top investor/trader Mark Minervini Tweeted yesterday that we could be seeing a fear-of-missing-out (FOMO) rally in stocks. He said: “I myself will stick with the same stock-by-stock discipline that has served me well for more than three decades.”
I think that’s good advice because it’s always wise for me to do my own thorough research before buying shares. And Minervini reckons that all volatility in the markets is undesirable – even knee-jerk, snap-back rallies like we saw yesterday. Indeed, there were losers as well as winners yesterday. Those companies benefitting from the pandemic sold off sharply. For example, names such as Synairgen, LoopUp, AO World and others.
Overall, I think yesterday’s news was positive. But the markets have probably over-reacted on the day of the vaccine announcement. I reckon we could see adjustments in share prices in the days ahead and the ‘truth’ about the improved outlook will be found somewhere in the middle ground after shares have settled down again.
But we’ve had a glimpse of a potentially brighter future. So, I’d double up on my efforts to find enduring long-term investments in the days and weeks ahead.