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Investors are going crazy for Covid-19 vaccine-related stocks, with companies gaining 5-10% easily in a day, but most of these gains are only because of hype and not actual value.
If you’re a value investor like me, then you would probably prefer to stay away from the hype that’s only going to last a few days or so.
So the question is, what are some vaccine-related stocks that aren’t getting much media love but still hold the value that can give you some good returns in the future? Stick with us for this blog because that is exactly what we’re going to discuss today.
But before we reveal our list of the best undervalued stocks to buy now, keep in mind that a vaccine-related stock doesn’t have to just be a stock that is producing the vaccine. In fact, those are the type of stocks that are getting the most media attention, and almost all of them, including Moderna, BioNTech, Pfizer, and AstraZeneca, are already overhyped and overvalued.
Our goal today is to stay away from the hype and shine a light on vaccine-related stocks that have a lower chance of being a boom or a buzz and have a wider economic moat that gives them the ability to compete & grow in the long-term, even after the whole pandemic thing has become a part of history.
So without further ado, let’s begin.
5 Best Undervalued Stocks to Buy Now
There are over 60 vaccine-related stocks on the Stock Card platform, which is what we’re using today for this analysis. Some of these stocks are getting huge hype while others aren’t. Some of them are still in momentum, while others seem to be slowing down or outright dead.
We’ve filtered out stocks that are potentially undervalued and can reward investors with good returns, or at least have a nice dividend yield so you can make some cash out of them this quarter.
#5: Johnson & Johnson (JNJ)
One of the largest companies on the list, and probably the one with the highest dividend payments at a 2.49% dividend yield.
The stock price of JNJ is not performing well since 2017, mainly due to a ton of legal actions taken against some of its drugs. The stock was consolidating near the all-time high of $157.11 since last year. However, the good news is that recently, it has successfully broken that level and now trading at a new all-time high of around $160.
Even after all the legal actions and increasing competition in the drugs market, Johnson & Johnson still remains a valuable company with an A+ profitability rating.
The company is so large that investing in it solely based on Covid-19 vaccine news is not relevant.
Looking at the chart, the stock is currently trading just below a pivot level at $161.41, a breakout and sustenance above which can bring the momentum back in JNJ and can expose your portfolio to some sizable capital gains.
If you’re investing for dividends and long-term growth, then you’re not in a rush to buy it at the current market price. Thus, you can consider placing your buy limit orders at key psychological levels at 146, 139, and 133, respectively.
#4: Regeneron Pharmaceuticals (REGN)
Regeneron Pharmaceuticals discovers, develops, and commercializes products that fight eye disease, cardiovascular disease, cancer, and inflammation.
A couple of months ago, the FDA granted Regeneron an emergency use authorization for a coronavirus treatment, which initially got its stock bulls all excited, but that excitement quickly faded away with the vaccine promise because people won’t need Regeneron’s treatment anymore, which obviously caused the stock price to drop.
In fact, REGN is falling since July 2020 after hitting an all-time high of $661.46. So why is this company still on our list of best undervalued stocks to buy now?
It has to do with Regeneron’s unique ability to develop antibodies to treat pandemics or other diseases in the long term. Also, let’s not forget that there is a population that is against vaccines, so a Covid-19 treatment is not gonna die down altogether.
REGN doesn’t pay a dividend, though. So a strategy revolving around this stock could either be value investing or swing trading.
Looking at the chart, we see that the price has probably bottomed out, and further bearish momentum is unlikely in the short term. The current market price is around $517, and the next resistance levels are at $526 and $536, respectively.
For a swing trade, you can buy after it crosses the resistance levels, and take profits at $586 or $661, or you can hold it long term depending on your views on the whole vaccine situation and your understanding of the company’s fundamentals.
#3: GlaxoSmithKline (GSK)
GlaxoSmithKline is one of the largest pharmaceutical companies by total sales. A GlaxoSmithKline-backed vaccine project is headed for advanced trials after showing a good immune response in the early stages. So this one is directly related to the vaccine hype.
But bad news first, the stock has not been performing well for a long time, and its price has been mainly bouncing up and down since 1999.
The reason why it has made it to our list is because of its very strong fundamentals. GSK has a $93 billion market cap and pays a whopping 5.41% dividend yield, but since the stock price is pretty cheap, this dividend yield only amounts to $2 per share per year.
The company has a wide economic moat, strong operations, and if you look at glassdoor, you’ll see that they are hiring aggressively, which shows strong confidence for future growth.
Looking at the chart, this is the stock that you should swing trade rather than investing long-term until you see a solid breakout above the key resistance level at around $60.
As you can see, the GSK stock price has been bouncing between key Fibonacci levels at $29 and $56 for the last two decades. Right now, the stock price is just at the median pivot point at $38.
A strategy that you can apply here is buying either at the current market price or the key support level of $29, if it revisits those levels, and take your profits at the $56 resistance level, collecting a bunch of dividends in the meantime.
#3[Tied] Honeywell International (HON)
Finally, a stock on this list that is not related to healthcare. Honeywell International is an aerospace tech company. But what coronavirus has to do with space technology, you might be thinking.
So here’s the deal, there is growing evidence that the Covid-19 could spread through the air, which is concerning as society tries to get back to normal.
Honeywell has produced its healthy building solutions to help manage virus outbreaks within an enclosed space, as well as the famous N95 masks that half of America doesn’t like wearing. These things have helped boost HON stock through the roof after the breakout of Covid-19 in march.
Now, after the vaccine, the demand for these products might go away, but Honeywell’s rapid response and ability to shift their product lines to adjust according to the circumstances isn’t going anywhere.
This shows that they have good management in place, which is one of the most important things while ranking stocks. It also pays a 1.75% dividend yield, so that is an added benefit right there.
One negative thing with HON is that it’s currently overvalued due to all the hype around it, and buying at the current market price will not be a great decision. You can wait for it to drop to some key psychological levels at 186, 171, and 158 before placing your buy order.
#2: Eli Lilly (LLY)
Eli Lilly is second on the list today because of its wide economic moats, fair dividend payments, and consistent growth. It also has solid fundamentals, like positive earnings per share, strong operations, and high growth potential. The dividend that LLY pays is also fair at a 1.99% yield.
Looking at the chart, the stock has recently broken its all-time high and a strong resistance level of $170 and is now in very bullish momentum. It is not the best time to invest in LLY as a value investor or even as a swing trader.
If you’re looking for a swing opportunity, then you should wait for a pullback to enter. If you get a pullback till at least 23% Fibonacci retracement levels, you can try a swing trade in LLY.
For long-term investors, though, the stock is already overvalued, and you should wait till it creates a new high and then revisits some key Fibonacci retracement levels.
#1: [Tied] Merck (MRK) & Amgen (AMGN)
The first spot is taken by two companies that check all the boxes in our filtering. Amgen is a leader in biotechnology-based human therapeutics. Merck is also a pharmaceutical company that makes products to treat several conditions in a number of therapeutic areas.
In December, Merck said that it is expanding its coronavirus work by buying a small biotech company and its Covid-19 drug. Merck also sold its equity stake in Coronavirus vaccine maker Moderna, in the beginning of December, mainly due to financial reasons while also stating that they have achieved substantial gains on their investment.
Merck and Moderna will also continue to collaborate for the development of personalized cancer vaccines, which is a good thing for its investors.
Amgen is one of three companies in the Covid R&D alliance, which was established in March last year to boost the coronavirus study. In December, the alliance launched a new clinical trial among hospitalized patients.
Both Merck and Amgen have a wide economic moat, strong operations, high growth potential, and have historically outperformed the market
Amgen pays a 2.79% dividend yield while Merck pays a healthy 3.17% dividend yield to its investors, and to make it to the top of our list, both of them currently seem fair or undervalued.
AMGN on the charts has formed a bullish double bottom reversal pattern and also broken its neckline, which indicates strong bullishness. For swing traders, the current market price looks good. For long-term investors, you should wait for a pullback.
MRK is currently struggling at 50% Fibonacci retracement levels. A good price to buy would be &76 and $74 if you’re investing for long-term or dividend payments.
That wraps up our list of 5 best undervalued stocks to buy now. You should now do your own research and pick the best stocks out of these that suit you and your investment strategy. If you don’t have an investment strategy yet that works best with your goals, then you can consider enrolling for the free on-demand masterclass below 👇