The end of the coronavirus seems ever closer. Today, the Oxford-AstraZeneca vaccine added its name to the list of positive results. Moving away from the obvious, however, I think there are a number of non-pharmaceutical that will benefit from the news.
Non-pharm, non-travel, Covid-19 shares
I’m staying away from both pharmaceutical and travel companies. Firstly, the benefits to pharmaceutical companies may seem obvious, but I think they should not. I doubt coronavirus vaccines will make any firm much profit directly, at first. The public outcry and government efforts would make it a PR and moral nightmare. It is likely big-Pharma will have to produce the vaccines for a long time though. When the headlines die down, then they will make money.
As for travel firms, I think the future is far too uncertain. Covid-19 vaccine news may be helping holiday shares, but I think this is too much too soon. The industry could have seen a fundamental change even if and when the coronavirus ends.
With that in mind, here are two non-pharmaceutical, non-travel ‘Covid shares’ I like right now.
My first choice for a stock that will benefit from a vaccine is oil giant BP (LSE: BP). My opinion here is predominantly based on oil prices. The end of Covid-19 will see people begin to travel again. And fear will be removed from the markets. Both these factors benefit oil prices.
The crude oil market does have some underlying weaknesses – namely spare capacity. However, I think major oil producers like Russia and OPEC will self-regulate this to support prices.
Though all oil majors will benefit from stronger crude prices, I think BP is a prime choice as an investment. It is heavily investing in green energy, which should secure its long-term future. In the meantime, it is undergoing some restructuring that will make it more efficient.
What’s more, at current levels it is paying a dividend in the 9% region. Personally, this is my top choice Covid-19 share right now.
Again, perhaps not an obvious choice, but let me explain. HSBC (LSE: HSBA), along with most other banks, has put in place large provision for bad loans. These provisions are precautions against potential losses from customers failing to repay loans. The coronavirus, lockdown, and a potential recession brought this about. If a Covid-19 vaccine helps life get back to normal, a recession could be avoided, and shares across the banking sector will benefit.
I should say the possibility of a recession is still far from over, though personally I am optimistic. The Chancellor has already laid out his priority of supporting the economy at the cost of national borrowing. The government will do everything it can to avoid recession.
My choice of HSBC compared to other banks is based on what I consider its underlying strengths. Even aside from a Covid-19 vaccine, it is undergoing a restructuring that will see overheads reduced and (I think) its share price bolstered.
It will be shifting capital from its weaker European and US arms to its main hub in Hong Kong. This is another key component that I think could help its finances over the long term.
I have been bullish on HSBC for quite a while. With some mild reservations about the future of the economy, I think it is one of the cheaper Covid-19 shares worth considering right now.
Karl has shares in BP and HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. 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.