News that pharmaceutical giant Pfizer has developed a coronavirus vaccine sent UK shares higher this week. This vaccine has been described as a ‘game-changer’ for stocks. As a result, investors have been scrambling to reposition their portfolios.
Here, I’m going to look at where I’m investing my own money now that a coronavirus vaccine is on the horizon. These are the stocks I’m buying.
Pfizer vaccine: a game-changer?
On the back of the vaccine news, many investors are now piling into the sectors that were hit the hardest by Covid-19, such as airlines, oil, and hospitality. However, this is not an approach I’m going to take. A vaccine will certainly benefit companies in these industries. Yet many may continue to face challenges for a while.
Airlines, for example, may not return to normal for years, despite a vaccine. The coronavirus has devastated this industry, and demand may be depressed for years. Aviation analyst John Strickland summed up the situation well. He responded to the vaccine development by saying: “This news is certainly very welcome but it would be massively premature to say that the airline sector can now return to normal. Enormous damage has already been done and we can expect failures this winter”.
Where I’m investing now
So, where will I be investing now that a vaccine is on the cards? Well, in recent years, I’ve been focusing my portfolio on three main types of stocks. I plan to continue investing this way going forward.
Large-cap technology stocks are one area of the stock market I’ve been focusing on. Companies I’ve invested in include Microsoft, Amazon, and Mastercard. In my view, all of these companies are well placed to benefit from the digital revolution. Amazon, for example, is benefiting from the growth of online shopping. Mastercard is benefiting from the shift to digital payments. Microsoft is benefiting from the growth of the cloud. I think these kinds of stocks should do well in the years ahead irrespective of what happens with Covid-19.
Large-cap dividend stocks are another area of the market I’ve focused on. Some examples of companies I’ve invested in include Diageo, Reckitt Benckiser, Unilever, and Smith & Nephew. All of these stocks have solid long-term growth potential. However, they’re a little less volatile than my growth stocks which means they bring stability to my portfolio.
Finally, I’ve also invested a little bit of money in small-cap growth stocks. These kinds of stocks are higher risk. However, they have the potential for explosive gains. Some examples of stocks I’ve bought include dotDigital, Keywords Studios, and freelance employment platform operator Upwork.
My goal: strong long-term returns
All of the companies I am investing in are exposed to powerful growth themes such as increased digitalisation, the ageing population, and the rise of wealth in the emerging markets. This means they should grow significantly over time. All have competitive advantages which should protect market share.
Meanwhile, with the exception of a few of the smaller companies I own, most companies are highly profitable. This increases the chances that they will turn out to be good long-term investments.
I believe this focus on highly-profitable companies with strong growth prospects should deliver strong returns in the long run.
Edward Sheldon owns shares in Amazon, Microsoft, Mastercard, Reckitt Bencksiser, Unilever, Diageo, Smith & Nephew, Upwork, Keywords Studios and dotDigital. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Mastercard, and Microsoft. The Motley Fool UK has recommended Diageo, dotDigital Group, Keywords Studios, and Unilever and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. 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.