By announcing promising Phase 1 results in a coronavirus vaccine trial, Moderna (NASDAQ: MRNA) was able to give the stock market one of its best days in weeks
on Monday. While still early in the clinical evaluation process, patients in the trial, who received the vaccine, developed virus-neutralizing antibodies. It’s one of the most promising results seen yet from the pharma space in the fight against COVID-19, as scientists work around the clock to develop a treatment.
The Cambridge, MA company was one of the first to announce a trial for a coronavirus vaccine and they’ve certainly become the pick of the bunch in terms of which pharma’s to back in the race for a cure. They’ve been working with the National Institute of Allergy and Infectious Diseases and have received close to $500 million in federal funding this year already. Monday’s announcement means they’re now the first company to see promising results from a clinical treatment tested on humans.
The Recovery Continues
The news was enough to send the S&P 500 up more than 3% and close to fresh recovery highs. It’s broken above the upper bounds of the range it’s consolidated in since early April and puts the benchmark index back at February levels. Monday was a “90% day”, where that percentage of S&P 500 components were in the green. It also means that in the two months since the peak of panic selling in March, the S&P 500 has been able to rally more than 30%.
For Moderna, shares were sent up 30% to all time highs. Even though there was some profit taking into the close, they still finished up more than 300% from January levels. They’re still a long way off from getting anything to market, but the development of pharmaceutical drugs and treatments is all about baby steps. They’ve already received approval from the FDA to proceed with a Phase 2 trial which will expand the dosing levels across 600 participants. This is expected to begin within Q2 with a Phase 3 hopefully beginning in July, assuming everything goes to plan.
Like many biotech companies when their stock experiences a massive jump on promising news, the company took advantage of the higher share price to issue fresh equity to raise funds. An additional 17.6 million shares will be sold at $76 this week which will raise more than $1.3 billion. Between longer-term investors and scalpers taking profit on yesterday’s huge jump and the news of the coming dilution, shares have seen some decent selling from their initial highs. In early trading on Tuesday, they were down 4% from Monday’s close and a full 11% from Monday’s high.
This is fairly normal for biotech traders as the mantra “buy the rumour, sell the news” continues to hold true. Investors thinking about getting involved might consider holding off for a few days to see where the stock settles after all this news. Biotech stocks are famous for ‘running-up’ to planned trial results so there’s plenty of road ahead before Phase 2 results come into play.
Across the broader market, the recovery from Q1’s crash continues, with more and more names taking back lost territory and many of them hitting fresh highs. States and countries around the world continue to scale back the initial restrictions and economies continue to grind back into life. We’re a long way off from a full recovery, but this is the best news the stock market has had in weeks so let’s enjoy it.
10 Buy and Hold Stocks to Add to Your Portfolio
“Set it and forget it” are words many investors don’t want to hear. Even the most venerable brokerage houses are encouraging their clients to actively trade so they can beat the market. Buy and hold is a relic, they say. It doesn’t reflect the reality of today.
In other words, “this time it’s different”.
As the ongoing volatility in the market shows you, it’s not different. It’s not even close to being different. The simple fact is that many active traders lose money by being too aggressive and too active for their own good.
And while it’s true that the market won’t always be this choppy, and certain stocks may be a great buy in months to come, right now investors are looking for safe harbors. One of the safest ways to invest is to find stocks that you can feel comfortable holding on to even in the worst of times. Frequently that can be because the stocks offer an attractive dividend. But sometimes, it’s also because they are in a market that is always in demand.
But that doesn’t mean you have to limit yourself to defensive stocks. You can find some quality buy-and-hold stocks that offer some attractive growth prospects.
View the "10 Buy and Hold Stocks to Add to Your Portfolio".