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Why You Should Not Dump Your Stay At Home Stocks Just Yet

Stay At Home Stocks

On Monday morning, a world that had become weary of a never-ending stream of negative news feeds woke up to a refreshing reboot. Pharmaceutical giant Pfizer (NYSE:PFE) and its partner BioNTech's (NASDAQ:BNTX) reported that their Covid-19 vaccine candidate, BNT162b2, has proved to be more than 90% effective in preventing infections of the deadly virus in early efficacy tests. 

Even better news: The vaccine could be released to the markets in a matter of weeks with the companies planning to obtain emergency use authorization (EUA) as soon as the vaccine passes safety tests.

The news has set world financial markets abuzz, with the U.K. placing an order for 40M doses of the new vaccine.

Meanwhile, stocks of companies that have benefitted from the stay-at-home trend have been selling off, and CNBC’s Jim Cramer says it’s time to cut them loose.

Despite the euphoria surrounding the possibility of a new Covid-19 vaccine becoming a reality sooner than most of us could have hoped for, it would not be prudent to dump all your stay at home stocks.

Here’s why.

All Weather Stay at home stocks

The Covid-19 pandemic triggered massive panic selling from February through May effectively bringing an end to the oldest bull market in stocks as the global economy entered into a deep recession.

Despite generous stimulus measures by the world governments that helped stock markets bounce back faster-than-expected, the pandemic altered the course of most markets thanks to widespread lockdown measures that spawned a class of work-at-home stocks. 

The ongoing pandemic has caused a seismic shift in work habits with remote work becoming the new norm. Many businesses are now allowing their employees to telecommute and work from home in a bid to enhance social distancing and minimize chances at infection--even when they don’t have to. 

Videotelephony and online chat services company Zoom Video Communications Inc. (NASDAQ:ZM) is one of the companies that have emerged as the biggest winners during the pandemic with ZM stock up a sizzling 465% in the year-to-date.

Zoom quickly became a household name due to the sudden popularity of work-from-home setups as authorities encouraged people to stay at home. 

Yet, the culture of remote work--just like online shopping--could outlive the pandemic.

Granted, a computer screen would be hard pressed to match the physical office when it comes to managerial oversight, mentorship and support and opportunities for social bonding. Yet, Covid-19 has been an eye-opener for companies who now realize they can save big money on commercial real estate, which is insanely expensive in places like Silicon Valley and Manhattan. Further, a virtual workplace is pushing companies and workers to focus more on performance rather than merely "clocking hours”.

Indeed, a sizable number of blue-chip companies--including Facebook and Twitter-- plan to continue allowing many of their workers to work remotely post Covid-19. Zoom investors are going to be better off for it far into the future despite the stock crashing 22% since the Pfizer vaccine was announced.

Amazon.com Inc. (NASDAQ:AMZN) is off 8% in two trading sessions. eCommerce has been booming during the lockdowns, and it comes as little surprise that Amazon has been winning all around.

Amazon stores have been doing gangbusters as retail stores that deal with non-essential goods were forced to close down. Meanwhile, Amazon Prime including the video streaming service has recorded a surge in subscribers as it continues to rival Netflix Inc. (NASDAQ:NFLX).

But that’s just part of the reason why AMZN is up 65.2% YTD. 

The company’s cloud business, AWS, has long been its profit engine, contributing more than 70% of its operating income and allowing the company to continue expanding at a rapid clip. During the last quarter, AWS revenue expanded a brisk 33% Y/Y in Q3 to $36.5B despite intense competition from the likes of Microsoft Inc.’s (NASDAQ:MSFT) Azure Cloud.

Speaking of which, Microsoft has been doing pretty well itself during the pandemic.

Microsoft’s growing  cloud traction is a big reason why MSFT shares are up 33.3% YTD and nearly 160% over the past three years. A Biden presidency is likely to improve relations with China where MSFT has significant exposure, offering further support for a business that recorded 48% Y/Y during the latest quarter.

Nvidia Inc. (NASDAQ:NVDA) has been shooting the lights out, returning nearly 120% YTD thanks to a surge in popularity for video games.

Netflix has gained nearly 50% in the year-to-date as the stay at home phenomenon continues to drive millions of new subscriptions worldwide.

These stocks were red-hot long before Covid-19--and have remained so even after the virus has devastated so many businesses. A vaccine is unlikely to do much harm to their long-term trajectory.

Other stocks to watch are health companies that have been pursuing a Covid-19 vaccine. These include:

  • Moderna (NASDAQ:MRNA)
  • Johnson & Johnson (NYSE:JNJ)
  • Sanofi (NASDAQ:SNY)
  • Merck (NYSE:MRK)
  • AstraZeneca (NASDAQ:AZN)
  • GlaxoSmithKline (NYSE:GSK)
  • Novavax (NASDAQ:NVAX)
  • Dynavax (NASDAQ:DVAX)

By Alex Kimani for Oilprice.com

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