Multiple companies are working on a coronavirus vaccine, and this week positive results from a trial were announced. A successful coronavirus vaccine would be a game-changer for the company who develops it. But, instead of trying to figure out which company will win the race, a better plan might be to buy stocks that could make you rich no matter who develops a coronavirus vaccine.
When the markets crashed, travel stocks and those that rely on the travel industry got walloped, so they are cheap. A coronavirus vaccine should help the travel and tourism industry get back to normal sooner than expected, which could mean swift travel stock price rises. Here are two stocks that could make you rich from a successful coronavirus vaccine.
Owning hundreds of shops selling high margin sandwiches and sausage rolls sounds good. Unfortunately for SSP Group (LSE: SSPG) its outlets, like Upper Crust and Caffé Ritazza, are often found in train stations and airports, and hungry travellers have been scarce.
The impact of the coronavirus on SSP and its employees has been severe. However, the medium-term prospects for the company look a little brighter. Passenger numbers are picking up in the US, Europe, and the UK – where SSP operates – and they need food for their journeys.
The market crash wiped 60% off the price of SSP shares. Right now, they are trading around 260p, which is cheap by historical standards. Should a coronavirus vaccine be released, SSP’s performance should recover much faster than is currently expected. I would expect SSP’s share price to take off under such a scenario, which could make investors rich.
But what if a vaccine does not materialise? Well, SSP has enough liquidity, and access to more if needed, to see it through its most pessimistic scenario. What this means is that the company is likely to be around in the future vaccine or no vaccine.
The coronavirus crisis has grounded fleets of planes across the world. Meggitt (LSE: MGGT) makes components and sub-systems for airliners. Fewer plane orders by airlines have put a dent in Meggitt’s sales of bits and pieces for new aircraft. Less scheduled and unscheduled maintenance of aircraft has also cost Meggitt sales.
Air travel is now picking up but remains well below normal. The current thinking is that it will take years for passenger numbers to get back to 2019 levels. A coronavirus vaccine would turn these assumptions on their head. Meggitt’s share price should benefit substantially from aircraft sales and activity hitting 2019 levels much sooner than currently expected.
The market crash wiped almost 60% off the value of shares in Meggitt. At a current price of 310p or so, shares are trading at about 12 times consensus earnings for 2021. Meggitt’s stock price-to-earnings multiple is usually around 14. What this suggests is that Meggitt’s stock is cheap at the moment. A coronavirus vaccine would lift 2021 consensus earnings, which would justify a higher price based on the P/E multiple. Meggitt stock could make an investor rich if a coronavirus vaccine is discovered.
James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Meggitt. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.