Insights

ASX 200 investors underexposed to this potential ‘great news event’

If an effective vaccine against the coronavirus were uncovered this week, many ASX 200 investors would be poorly positioned to benefit.
The post ASX 200 investors underexposed to this potential ‘great news event’ appeared first on Motley Fool Australia. –

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The silver bullet to slay the coronavirus and return life to normal remains elusive. But that doesn’t mean it might not be here sooner than most S&P/ASX 200 Index (ASX: XJO) investors are pricing in.

The world’s top institutions and brightest minds are working around the clock, after all, with record amounts of private and government funding pouring in.

However, recent setbacks with some leading vaccine trials, alongside announcements that any new vaccines may only prove 50–60% effective, have seen the share prices of most ASX 200 travel, leisure and retail shares remain well below pre-pandemic levels.

Does your ASX portfolio have exposure to an early, effective vaccine?

Dmitry Balyasny is the co-founder of the Chicago-based hedge fund Balyasny Asset Management.

According to Bloomberg, Balyasny says that while most investors expect a COVID-19 vaccine to be available this year, the market has priced in the likelihood it will only be 50–60% effective.

He notes that if a more effective vaccine is produced and delivered faster than expected, “Markets will start to look through the current weakness for the companies that have really been affected.”

Balyasny adds:

If there is a solution where the markets are confident that, well, OK, this is a real solution to the problem, whether it takes three months or six months, the stocks will move ahead of that.

Foolish takeaway

There is no shortage of quality travel, retail and leisure shares on the ASX 200 still trading well below their pre-COVID levels.

One share I believe remains significantly undervalued in the long term, and potentially in the short-term should an effective vaccine be delivered, is Qantas Airways Limited (ASX: QAN).

Qantas was founded in Queensland in 1920, making it the world’s second oldest airline. Today the company is Australia’s largest airline for domestic and international travel.

With both its domestic and international flights all but grounded in efforts to contain the virus, Qantas’ share price plunged 68% from 20 February through to 19 March. Although it has regained 99% from that low, shares remain down 41% year-to-date.

By comparison, the ASX 200 is down 7%.

Qantas’ share price stands to benefit from the reopening of domestic flights in Australia. As well as from the proposed travel bubbles with New Zealand, Singapore, Japan, Pacific island nations and South Korea.

But if an effective vaccine is delivered and distributed faster than expected, Qantas could be flying passengers across the world again next year.

If the Qantas share price were to regain its 2 January levels, that represents a 70% upside from yesterday’s closing price of $4.25 per share.

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More reading

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post ASX 200 investors underexposed to this potential ‘great news event’ appeared first on Motley Fool Australia.

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