There are lots of polls these days about vaccines, when will we get one, who has the best, can they be in place by the year's end?
I think it's dicey. Remember, you have to get at least 30,000 people to trial your vaccine, if you are going to have any real, reliable results. You can go at "warp speed," but, remember, you have to have people actually out there, willing to risk exposing themselves, so you know that it works against Covid-19.
That means you want to give it to people in the hot spots, and you want to have a real chance that they are in the midst of Covid and aren't getting it. The people participating in the clinical trials need to live a little on the edge. They have to be out there, in areas that aren't like New York, unless you are on the subway, and, even there, the new mask law will make it tougher to get.
But we know that AstraZeneca's (AZN) vaccine candidate, which looked like it was in first place, hit a bump, because of an undisclosed issue involving one person in a U.K. trial. Now its trials in the U.S. are reportedly on hold, at least temporarily. But Pfizer (PFE) is trying to get it out there, too, I hope by late 2020.
No matter what, here's what's happened: The possibility of a vaccine has now been part of the day- to-day decision-making.
Let me give you some examples.
Marriott's (MAR) stock is up four points. On what? On nothing. Or is it a bet on the vaccine? I think it's the latter, plus a healthy dollop of good numbers out of China. The hotel group's been hurting. About 30% of the hotels in New York are in arrears. So you could argue that Marriott may be the last man standing. I don't think the market's that discerning. It's September. Buyers know that Marriott will get out fine, maybe even stronger, when this pandemic is curbed. Same with Hilton (HLT) and Host Hotels (HST) , both of which saw their stocks go up more than 5% Moday.
When retailer TJX (TJX) reported, it was a disaster. I know, my charitable trust owns it and I have been dreading talking about it on this Wednesday's Action Alerts PLUS club call. Why? Because it so blew the last quarter. It doesn't have an online business, so it relies on brick and mortar. It had the wrong inventory. Its footprint isn't really fit for social distancing.
Yet, the worst day was the day it reported that foul number. Again, it could be last man standing. It will be getting some terrific inventory from retailers that are closing. I think it would be hard for it not to do well, even as it is only brick-and-mortar. This market is saying, though, the vaccine is coming, so buy the retailer that does best when the economy reopens. So, maybe you go after the worst?
Yes, the market loves retail all of a sudden, which is why the stocks of Kohl's (KSS) and Bed Bath & Beyond (BBBY) are up more than 4%. It's why strip mall real estate investment trust Kimco (KIM) and enclosed mall company Simon Properties (SPG) are seeing their stocks soar. These companies were written off for dead not that long ago. But they won't be dead, if we have a vaccine in the fourth quarter. By the way, I think that Bed Bath and Beyond is making progress. I know it has a long way to go and it still seems weird that they rely on fliers. Yet, I think that the turn may be for real especially given the new management.
More vaccine evidence?
How about the stocks of Tapestry (TPR) , Ralph Lauren (RL) and PVH (PVH) . These companies were supposed to be untouchable. After all, they make apparel and handbags that sell in the mall and the mall was supposed to be dead. Tapestry, in particular, has been a disaster. Management changes, questionable judgment, just horrible. But here it comes. I actually liked the quarter Ralph Lauren gave, and I think that its digital efforts are going to pay off. PVH had a big decline in inventory and in this market that counts as a real win.
I still want to buy the best, I like Lowe's (LOW) and Home Depot (HD) and Costco (COST) and Walmart (WMT) . I think that Best Buy and Williams-Sonoma (WSM) both have excellent prospects and Target (TGT) is still a bargain, given how great that last quarter was. But that's not what people want. They want the survivors. Not the saviors. At least not now.
I have no idea how Darden (DRI) can have such a miraculous rise over the last few weeks, other than when we get the vaccine they will still be in business and most other restaurants won't be. Right now they have a big enough balance sheet to ride it out and they have plenty of people who are willing to take out food from its restaurants -- Olive Garden is doing relatively well, which is good enough. Darden isn't alone. Brinker (EAT) has been on a tear, because it has a takeout wings business. A nice copy cat of Wingstop (WING) , which is one of the hottest stocks in the market? Who cares? It's going to make it.
If you want to know, which one is still the most investible, I would chose Yum (YUM) . I think that it is finally starting to get serious about strapped franchises, while it has really fixed up Taco Bell and there's been nothing wrong with KFC. If it can even moderately improve Pizza Hut -- I know, tall order -- then it can really soar. I like it as a vaccine play for certain.
Finally, there's Penn National (PENN) long my favorite casino chain.The company used to be considered some useless roll-up without Macau gaming. But now, though, because of its tie-up with Barstool, it is going to be the premier betting site for legal gambling, something that could be in every state in the union in a short time -- you can lay down bets in 33 states right now. I can't believe this stock was at $3 not that long ago. What a steal, but, believe it or not, when people see how well the Bar Stool fit is -- and yes, that's the ubiquitous Dave Porney and company -- I think numbers will have to come up, way up. Buy some and wait for a pullback? Probably the best way. No wonder it is up five. There are plenty of gamblers who want both the NFL and Penn National stock. I think the latter is more of a sure thing than betting on any NFL favorite.
There can be one other explanation for the strength of these stocks. The Speaker of the House Nancy Pelosi and the Treasury Secretary Steven Mnuchin might see eye-to-eye on a targeted package that tries to help these very industries. My hope is that they try to save the smaller and medium-size businesses that otherwise aren't going to make it to the vaccine's promise land. Either way, though, given that there is vociferous wagering on the vaccines, you can expect these marginal players to get stronger.
What's still worth buying besides Yum? I wish I could say TJX, but that would be too self-serving, as I own it for the trust, because I thought it was working and I was wrong. I like the Penn National, but if you really want to know the deepest value, it is going to be, not the airlines, too much price warring, but the cruise ships, where there is little-to-no capacity and lots of great deals now, if you believe a vaccine is coming. These stocks bottomed a long time ago.To me the choice is simple: Norwegian Cruise (NCLH) , because the company raised a ton of money to be able to go a couple of years. I think it works even if warp speed becomes jog speed.