Panic Journal Season 2 (3) – “There’s a Light”
Just a few days ago we had a total different situation when I wrote my last panic journal entry:
Covid-19 infections went parabolic again, lock downs had already started, the US election was still in front of us, there was really bad weather and markets were in a suddenly very depressive mood.
Just 8 or 9 days later, things look different: Joe Biden has won and The German-American Duo Pfizer-Biontech released very promising (early) results of its Phase III Study.
As I am not a vaccine/Virus expert, I’ll link to a post on how to interpret the results and try to summarize them:
- the data is not fully validated yet, but there seems to have been some kind of check from independent scientists (Data Monitoring Committee)
- The underlying cases are relatively small. Some 40k people did take part in the study, of which roughly half got the vaccine and a total of 94 people were infected
- Based on these relatively small numbers, the vaccine seems however more effective than initially thought, so if I understand it correctly, of the group that got the vaccine only the probability to become (seriously) infected is 90% lower than the control group
- Plus, with ~20k people having received the vaccine, it seems to be quite safe as well
- it is also a break through for the so-called mRNA based vaccines, which don’t need another virus as carrier. As far as I understand it, these vaccines are easier to produce in scale and faster to develop against potential future pandemic viruses
This is what I wrote in the last post:
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The official availability as such a vaccine could be already a huge positive psychological factor on its own, independent from the actual possibility to get the vaccine
I think I have underestimated the fact that even a not completely verified statement from Pfizer and Biontech can have such an impact on the market as we have seen today. Psychologically this is understandable: If you your are in a really dark tunnel, telling oneself that there will be a light at some point is good, but actually seeing a tiny little light is much much better (unless it is a train coming but that’s another story).
In the real world, one could now argue that Covid-19 now hopefully has moved from being an existential problem for humanity to an “engineering” problem.
“We” now know that there is a solution and we only need to do (a lot of) engineering towards the solution, being it transport at -70% Celsius, mass production or actually mass vaccination. All big problems, but solvable.
Market impact/portfolio
So what we saw today was a big move, especially Covid-losers (except DT) gained big time, whereas Covid-winners were rather weak (Zoom for instance -13%).
Personally I think (and maybe I am wrong) that today’s news was actually a psychological game changer. Yes, in reality it will be many months until we are all back to “normal” and no one really knows what normal is. On the other hand as mentioned above, for many businesses now the future will be easier to “engineer” via investors, banks, business partners and customers have more hope.
So as a consequence I started buying smaller amounts of some Covid-losers today with a focus on travel/entertainment as I think I know that sector best among the covid losers:
- the biggest part (~2%) of the portfolio went into TFF Group. Yes that’s right, I think TFF was an indirect Covid loser as its clients (vineyards, whisky/bourbon producers and indirect restaurants and bars) were suffering. Yes, results were already weak before Covid-19 but this was a long term organic investment program that should yield its profits in the coming years
- I also added a small “travel/entertainment basket” of beaten up stocks that I think can benefit relatively early and can in my opinion survive the next 12-18 months: Hostelworld Plc (1%), Dufry (1%) ENAV SpA (1%) and Anheuser-Bush InBev (1%). Some of them I got relatively early (Hostelworld), for most of them I paid “full” price after the bounce
I have to admit that some of these purchases were spontaneous and I might want to rethink them in the next few days but overall I think now seems to be the time for some “real” value investing again. There will be of course set backs, but I do think that the path to recovery now looks much clearer.
Some random notes and a bonus
Another very positive aspect of today’s news was the fact that actually a German company contributed significantly to this result (Biontech). Even more interesting is the story of the founder, a German with an immigration background. As we have many little Donald Trumps in our country, I think this example of a successful (Turkish) immigrant with very humpble roots (his father was a worker in the Ford automobile factory) is a very good argument to defend a relatively liberal approach to emigration which in the long run will benefit the country. And maybe it is an inspiration for many immigrants that you can really make it even in a country like Germany.
Another small detail that has been picked up by some media already is the official address of Biontech:
An der Goldgrube 12
D-55131 Mainz
Germany
Directly translated this means “At the Gold Mine, number 12”. A wise choice for the company whose CEO is now a multi billionaire. And, other than many Tech founders, he will most likely make the world a better place with less people dying.
Finally the bonus which fits to the title: There’s a light (Rocky Horror Picture Show):
value and opportunity 
For the record: I added a another 1% Position to my Travel/leisure recovery basket: JD Wetherspoon.
For the record: I added Southwest Airlines to my “Travel recovery” basket with 1% portfolio weight at ~45,90 USD/share.
Main reason: Low cost carrier, low exposure to business travel, early beneficiary if a potential US travel boom 2021 and is expanding aggressively .during the crisis:
https://www.wsj.com/articles/southwest-airlines-covid-expansion-airports-11605296205?mod=searchresults_pos2&page=1
I added to my AB Inbev position. !% add on at 57,40 EUR/share.
The light got a little bit brighter: Moderna’s mRNA vaccine showed better results and can be stored a -4 degrees Celsius:
https://www.ft.com/content/9d7a2e24-aea0-4c45-82ab-509dc80ed5a1
One engineering problem less in distribution.
Kathrin Jansen at Pfizer, is also to be mentioned. Big part is for this incredible woman!
Pfizer clearly has made a big contribution here as well.
I don’t know how usable this vaccin will be. You need cold storage of -70 degrees Celsius als in transport.
Several doctors argue that we’ll have to wait for one of the other vaccines.
See:
https://www.fiercepharma.com/pharma/five-important-questions-about-pfizer-s-covid-19-vaccine
As I mentioned in my post: These are engineering problems, storage temperature is one of them. But much easier to solve than the existential problem in my opinion. Just as a comparison: Somehow we seem to be able to transport LNG at -160 degrees Celcius over long distances, so I guess there are solutions out there for this problem.
The company has existed for 12 years. About 26 products are developed. Only 1 product of these is now in phase 2 of 3 and 11 products have just passed the pre-clinical phase and are only in phase 1 of 3.
So, as it looks like no product of this company has ever been approved and is on the market. Most of the products did not even get past the 1 test phase.
The rights to mRNA for HIV and tuberculosis, for example, are held by the Gates Fondation.
In 2019 the company suddenly went public.
So, for 12 years they have been researching about 26 products in the preliminary stage of phase 1, but the head of the company is still to be found in 2019 among the 100 richest Germans and suddenly they manage to develop a vaccine against Covid19 in only 6 months.
It looks like SCAM to me not a “success story”.
https://investors.biontech.de/annual-reports?fbclid=IwAR0bp1lrCFplcsTdOtFdnJMFcfIni10TylSJy7buXZJazJffeTo0gVO2AYM
I am not sure how deep your expertise is with Biotech companies. But for most of these companies, the life Cycle looks exactly like you outlined above, especially if the work on complete new and revolutionary technologies like mRNA.
To be honest, I do not understand Biotech companies either and stay away from them, but in contrast to your opinion I don’t see any indication of a “SCAM”.
Adapting the technology that they developed against cancer to Covid-19 in such a short time and realizing these results with Pfizer to me still represents a gigantic achievement.
Maybe the valuation of the stock is too high ? Who knows, but investors seem to be willing to pay these prices. Even if the company is vastly overvalued, they still achieved this before anyone else-
My recommendation to you would be to dig a little bit deeper into Biotech companies and try to learn more on how they operate in general and how long the lead times are for breakthrough technologies.
Biontech entered a collaboration with Pfizer on influenza vaccines already in 2018. So they didn’t had to start from scratch for Covid-19.
To my knowledge, Influenza and Coronavirus are very different. So different that a lot of people claimed (in the beginning) that it is not possible that there will be a vaccine. I am very glad that the Biontech people thought differently.
How frustrating ! Once in a lifetime a german makes a funny joke, and no one grasps it ! (–>Covid losers and DT! x-D !)
Congrats mmi for geting one ride on the wild side (of irony).
At least one reader got it 😉
A good summary of sell side analysts’ reaction:
https://www.ft.com/content/cbf74ab0-a05f-431a-86d0-a8b0d8c0b6cc
Personally, I loved the words below ‘Some random notes and a bonus’ 🙂
Comment slightly edited: One Turkish-German that invents a huge company, doesn’t mean we should accet large numbers of unqualified immigrants
This is not a blog to discuss the specifics of immigration policy, especially with regard to DT like statements. Let’s keep it like that: One immigrant child contributed massively to all our benefit.
Thank you for publishing my comment even if you left out some of the data points.
mmi is quite open minded, even with Trumpy-like guys and their politically incorrect (often unqualified) comments.