The creators of Viagra may be on the verge of saving the planet. Pfizer announced that preliminary studies of its COVID-19 vaccine had over 90% efficacy. Assuming the vaccine passes more trials and is distributed swiftly, we could crawl back to normalcy by the end of 2021.
This means certain sectors of the economy could rebound next year. Here are my top three picks for stocks that benefit the most from this news.
I’m sure most people haven’t been to the cinema since March. Even if indoor auditoriums were open, major studios have pushed back their releases to next year. 2020 has been a horrible year for companies like Cineplex (TSX:CGX). The stock has lost 79% of its value this year.
This week, it bounced 33%, indicating a massive rebound if theatres reopen across Canada by next year. Unlike the other stocks on this list, Cineplex is heavily exposed to the local economy. If Canada can secure the Pfizer vaccine and reach herd immunity sooner than other nations, which seems likely, Cineplex could be the ultimate vaccine rebound stock.
However, the company only has $13.8 million in cash and cash equivalents on its books and a debt-to-equity ratio of 6.5. They need to issue more equity or raise funds from an institutional investor to survive another year while the rebound is underway. A fundraising deal could be a bigger catalyst for Cineplex than the vaccine at this point.
Unlike Cineplex, Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY) has a comfortable cushion of cash and the support of Canada’s largest asset manager to back it up.
Brookfield’s exposure to office and retail properties made it particularly vulnerable to this crisis. The stock lost roughly 60% of its value in March, when malls, offices and exhibition centres were shut down across the globe. Since then, the stock has rebounded by a whopping 108%.
Over the past six months, the company has been raising capital and acquiring distressed properties. This week, the team announced a $2.7 billion property deal in India and a $742 million securitization deal from its auto property segment to bolster its balance sheet.
In other words, this company is well funded to not only survive but thrive in this distressed environment. The vaccine could help boost footfall in Brookfield’s offices and retail locations next year, which is when the stock could bounce. Meanwhile, Brookfield stock offers an unbelievably attractive 8.78% dividend yield.
The most obvious rebound stock is Air Canada (TSX:AC). As I mentioned earlier, Canada’s smaller population and the federal government’s supply deal with Pfizer could mean that Canada achieves herd immunity sooner than most other developed nations. This means domestic air travel could rebound sharply in 2021, with international travel recovering shortly after.
Air Canada stock, meanwhile, is still trading at a depressed valuation. At the time of writing, the company has more cash and cash equivalents ($8.64 billion) than its market capitalization ($5.84 billion). Debt, of course, is still a concern but could be resolved by a government bailout.
In short, Air Canada stock is a top pick for a 2021 vaccine rebound.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Property Partners LP.