The novel coronavirus has already wreaked havoc on economic growth. The United States’ GDP contracted by a record 32.9% during the second quarter of 2020. Needless to say, that GDP contraction has also impacted profitability growth for many companies. But there are a handful of so-called coronavirus stocks performing incredibly well.
With no end in sight for the pandemic, it makes sense to consider exposure to these coronavirus stocks.
One area of focus has been vaccine development, and there are several names to consider in this segment. Companies making healthcare and personal protective equipment are also beneficiaries.
With that in mind, here are four coronavirus stocks worth holding during the pandemic — and even after the pandemic is over.
Coronavirus Stocks: Pfizer (PFE)
PFE stock is a must-have in any portfolio of coronavirus stocks. It is worth noting that in the last month, shares have surged 12%. This upside has been driven by strong quarterly results coupled with developments related to the company’s coronavirus vaccine.
Investors recently learned that Pfizer is likely to seek U.S. Food and Drug Administration approval for emergency use of its Covid-19 vaccine. With that approval, Pfizer and its partner BioNTech (NASDAQ:BNTX) could begin deploying vaccinations in October 2020.
Pfizer and BioNTech have already inked a deal with the U.S. government to supply 600 million doses of the vaccine. In addition, the partnership has also pledged 120 million doses of the vaccine to Japan. A deal with the European Union is also in the works.
Clearly, PFE stock will remain in the spotlight in the coming quarters. Importantly, the company is likely to continue delivering strong numbers. PFE stock also has an attractive dividend yield of 3.9%, which is sustainable. This is another reason to consider exposure to the low beta stock.
3M (MMM)
3M didn’t have a good second quarter. However, that does not make MMM stock unattractive for a medium- to long-term investment horizon. The weakness in the stock is an accumulation opportunity for a company that is paying a robust dividend of $5.88.
Coming to the business growth, 3M expects respirator-related demand will contribute 300 basis points to 350 basis points to the company’s organic sales growth in the coming quarter. Even beyond that, demand is likely to remain strong.
Further, even with near-term weakness, I am bullish on the company’s healthcare, consumer and safety business division. In the coming quarters, there will be product innovation that will be directed toward demand in the post-pandemic world.
The company also has a globally diversified business. In other words, its presence in emerging economies can help drive long-term sales growth. Overall, 3M is a fundamentally strong company with stable cash flows and visibility for dividend growth.
Coronavirus Stocks: Gilead Sciences (GILD)
I would use the recent correction in GILD stock to consider exposure for the medium term. Gilead Sciences has been among the leaders in the coronavirus crisis. How? Its remdesivir was quick to receive emergency-use authorization for coronavirus patients.
Recently, Gilead Sciences won a 63 million euros contract for the use of remdesivir in the European Union. India has also approved the emergency use of remdesivir. It’s worth noting that India is now among the hardest-hit countries from the coronavirus pandemic.
Therefore, with the global use of remdesivir rising, I expect strong numbers from the company in the coming quarters. This is likely to take GILD stock higher. I want to add here that the company is working on an inhaled solution of remdesivir for outpatient treatment. If there is positive news on this front, the drug can cater to a wider population. This would imply accelerated top-line growth.
I also like the fact that GILD stock currently pays a dividend of $2.72 per share, which translates into a dividend yield of 3.8%. With strong top-line and earnings growth expected, dividends can increase in the coming year.
Clorox (CLX)
In the last six months, CLX stock has surged by 50% — and I believe that the rally is likely to last. With an annual dividend of $4.44, the stock is among the most attractive coronavirus names to consider.
As a brief overview, Clorox is a manufacturer of disinfectant products. This is the reason for the stock surging in the recent past. With the pandemic, demand for the company’s products has increased.
Furthermore, it is likely that demand will remain strong, not just for the near term, but also for the long term. The following point from the company’s conference call puts things into perspective:
“Organic sales were up 17%, supported by strong volume growth in all segments and significant demand of our products during the pandemic, products that either play an important role in public health or support the everyday lives of people, especially as they spend more time at home.”
I also like the fact that the company derives 16% of its sales from international markets. Presence in high-growth markets like Asia, South America and Africa can accelerate long-term growth.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, he did not hold a position in any of the aforementioned securities.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector. As of this writing, he did not hold a position in any of the aforementioned securities.