2021 Company of the Year.
There are actually two companies that top the charts for 2021. They are providing things that most of us need most right now, which we didn’t concern ourselves at all with a year ago. They are not the only companies doing what they do. However, they are doing it best. Discovering which company is the best in a hot field requires going to the basics of what makes a company great. What is the product? Who are the customers? Why is that company‘s product superior and why does everyone want it more than the competition’s version? Who is leading the company and can the leadership team and Board of Directors continue to produce a superior product and keep the competition at bay?
The Product and Customers
When you think of the one thing that everyone is clamoring to get, which none of us cared about a year ago, it’s the coronavirus vaccine. The marketplace is the largest one we’ve ever seen – potentially everyone in the world.
Many major biotech companies have launched a vaccine. Pfizer and Moderna have a leg up on the competition with FDA approvals and solid distribution. Johnson & Johnson and AstraZeneca have been dogged with production malfunctions, side effects or regulatory concerns. With over 1/3 of U.S. adults vaccinated (or in the process of receiving their 2nd shot), you might think that the party will be over for the companies that are currently approved. However, there is still the rest of the world, and any booster shot that might be needed, which many experts agree is likely.
When I was analyzing companies that are competing with the Covid-19 vaccine, I also put in a company that provides Covid testing and companies that are developing immunology and therapeutic solutions for the virus. What I discovered was that the revenue growth of two of the companies on my Stock Report Card was positively eye-popping. Moderna’s revenue increased to $1.9 billion in the 1st quarter, from just $8 million in the year prior – an increase of 23,000%. The company expects to deliver 800 million doses of their vaccine in 2021, with a goal of increasing that to 1 billion. At that level, Moderna’s revenue in 2021 could easily reach the $19.2 billion indicated by the APAs (Advance Purchase Agreements). MSN.com pegs Moderna’s forward price-earnings ratio at just 6.47, which is astonishing for a company with this kind of growth.
Fulgent Genetics, makers of a Covid-19 test, along with many other diagnostic tests, saw revenue increase by 4,500% to $359.4 million, with net income of $200.7 million. Fulgent is another company with a very low P/E of just 4.54.
Biotechnology is a very volatile sector. The Covid-19 vaccine came out quickly, without any longitudinal testing. Many folks had already received the Johnson and Johnson vaccine, when they were advised that there was a small risk of blood clotting. If any major health side effects should be revealed and tied to Moderna (or Pfizer), you can expect the stock to drop pretty suddenly. (This makes an investment in Fulgent slightly safer.) The only thing that saves publicly traded biotechs from share price volatility is a preauthorized buyback plan. (That’s what Boeing has done for the past two years to keep its stock high, amidst the multiple problems with their airlines and the airline industry itself.)
If you might be interested in how the body can be aided in healing itself, then you might be more interested in Regeneron, Adaptive and Vir Biotechnology. These companies all have benefits beyond Covid-19. All of these companies have strong connections to The National Institute of Health and the CDC. Adaptive has partnerships with Amgen and Microsoft, to name a few. Vir Biotechnologies partners include The Gates Foundation. Smaller companies like Vir Biotech and Adaptive Biotechnologies have extreme share price volatility. Vir’s price soared to $140 a share earlier this year. Today’s price is quite a bargain compared to that, if it can reach those heights again. The pipeline, trial results and FDA approvals are what tend to fuel investor interest.
3-Ingredient Recipe for Cooking Up Profits
Whether you are interested in Moderna, Fulgent, Vir or Adaptive, after you’ve found your leader, you must then purchase the stock for a good price to make sure that you are on the right side of the trade. There’s no reason to think about price, until you’ve found the leader. (Take the ingredients in order.)
3-Ingredient Recipe for Cooking Up Profits
Price-earnings ratio can be one tool for making sure that you are purchasing for a reasonable price. For instance, Moderna is trading close to an all-time high. However, based upon the 2021 and 2022 sales potential, the price is actually quite low. As more and more headlines emerge about the astonishing revenue growth of Moderna, the price could be pushed up from where it currently is. So, if you try and wait for a better price, it may never come. On the other hand, if there is any problem with the vaccine, then the price could plummet. Biotech offers higher risk, and higher rewards.
Fulgent is trading at a 62% discount from the highs set in January of 2021. If you think there will be no need for Covid-19 testing going forward, then Fulgent isn’t the company for you. However, Fulgent is projecting revenue of $830 million this year, which is double last year’s. That’s amazing growth, particularly for a company that is trading at a P/E of 4.54.
Companies of the Year
2021’s Company of the Year designation is shared by Moderna and Fulgent. In 2021, the world needs a Covid-19 vaccine. Beyond 2021, we will likely need a booster. We will also continue to need Covid testing, particularly if we want to travel.
Regular Rebalancing & Babysitting
Whenever you are investing in an individual company, it requires babysitting. If the company shoots the moon, it’s a very good idea to do a little profit taking and take some gains off the table, just in case there is any kind of bad news down the pike. Here’s where the pie chart system and regular rebalancing can help you. Buy & Hold is not a strategy that has worked in the 21st-Century – not for stocks, gold, crypto or real estate. Proper diversification with regular rebalancing does.
The Macro Environment
2021 is predicted to bring 6.5% GDP growth in the U.S. (compared to 8.4% in China). That would usually equate to a stellar year for stocks. However, the recovery is already priced into most stocks. (Moderna and Fulgent are some of the only stocks I’ve seen that are trading at a value). There is a Debt Ceiling debate coming up for the end of July in Congress. Additionally, the U.S. has a negative outlook on their AAA credit rating from Fitch Ratings. A downgrade or Congressional gridlock would be negative for stocks.
It’s important to remember that the macro environment can influence the trajectory of any company’s share price. A rising tide lifts all ships. A sinking tide can ground them.
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Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 4th edition of The ABCs of Money was released on October 17, 2020.
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Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.