If you’re looking for stocks to buy over the next three to six months, the best place to look is for stocks that could benefit in a big way from a novel coronavirus vaccine.
A vaccine has long been seen on Wall Street — and Main Street — as the one landmark achievement which will propel us meaningfully forward in the fight against the pandemic. An effective and widely available Covid-19 vaccine will save a lot of lives, restore consumer confidence, normalize behaviors and help the world the heal.
So, it was a huge deal over the weekend when news broke that President Donald Trump is considering awarding emergency-use authorization in October to the leading Covid-19 vaccine being jointly developed by AstraZeneca (NYSE:AZN) and the University of Oxford.
The implication of that news, of course, is that we could have a Covid-19 vaccine as early as October — which would amount to a meaningfully positive catalyst for stocks that many on Wall Street are calling the “Vaxtober Surprise.”
Of course, Trump is doing this almost purely for political purposes. He wants a vaccine ahead of the election to boost his standing among the American people. To that end, the AstraZeneca vaccine — at that point in time — will not have undergone as rigorous testing as we are used to for vaccines. It will only have published data on a small, 10,000-person clinical trial.
That obviously will create confusion if this vaccine does receive EUA in October.
Still, the Vaxtober Surprise will boost beaten-down stocks that stand to benefit as the return to “normal” gains clarity.
With that in mind, here are 10 stocks to buy if you think a Vaxtober Surprise is coming soon:
- Wells Fargo (NYSE:WFC)
- Kohl’s (NYSE:KSS)
- Under Armour (NYSE:UA, NYSE:UAA)
- Live Nation (NYSE:LYV)
- Benefitfocus (NASDAQ:BNFT)
- Bed Bath & Beyond (NASDAQ:BBBY)
- Six Flags (NYSE:SIX)
- Lyft (NASDAQ:LYFT)
- Las Vegas Sands (NYSE:LVS)
- Yelp (NYSE:YELP)
- Urban Outfitters (NASDAQ:URBN)
- Groupon (NASDAQ:GRPN)
- Planet Fitness (NYSE:PLNT)
- Foot Locker (NYSE:FL)
- Carnival (NYSE:CCL)
Stocks to Buy: Wells Fargo (WFC)
Banks stocks will pop in a big way if we get a Vaxtober Surprise.
Because as goes the outlook for the U.S. economy, so go bank stocks. A Vaxtober Surprise will meaningfully improve the outlook for the U.S. economy. Consumer confidence will rebound. Consumer spending will rebound. Banking activity will rebound. The long end of the yield curve will move higher. These companies will make more money on net interest income (their biggest profit driver).
Needless to say, then, a Vaxtober Surprise will boost bank stocks.
The best bank stock to buy for this potential upside catalyst is Wells Fargo, since it’s the most beaten up of the group, with the cheapest valuation, and the broadest exposure to the consumer banking sector.
Of course, a Vaxtober Surprise will also meaningfully boost the outlook for the physical shopping sector, since vaccinated consumers in the future will feel much safer and more comfortable returning to brick-and-mortar shopping.
One of the best ways to play this trend is by buying Kohl’s stock.
That’s because Kohl’s is a brick-and-mortar retailer with winning attributes — such as off-price, off-mall, a huge private-label business and a big loyalty rewards program — that will enable it to win market share in 2021 from retailers who went under during the pandemic, like J.C. Penney (OTCMKTS:JCPNQ).
Thus, in 2021, Kohl’s could report really big numbers, especially since the lap in 2020 will be very depressed. Those really big numbers will converge on what is a hugely discounted valuation on KSS stock, to spark a big rebound rally in shares.
A Vaxtober Surprise will be the catalyst which gets that rally started.
Stocks to Buy: Under Armour (UA, UAA)
One of my favorite names over the next 12 months is Under Armour stock.
For years, Under Armour has been plagued by poor branding, mostly because management aggressively sold into lower-price channels to increase reach.
The pandemic, however, has forced management to rethink its strategy. And they have come to the right conclusion. Cut the lower-price channels. Build out a direct-to-consumer channel where they can control brand equity. Create a premium experience in that DTC channel. Sell premium products through that premium experience.
Great pivot, which will ultimately restore brand equity and boost demand.
And it’s happening ahead of a major turning point in consumer spending on apparel … with UAA stock still at extremely depressed levels.
The writing is on the wall here. Under Armour stock could soar over the next year.
Live Nation (LYV)
No one is going to concerts right now. But a Vaxtober Surprise will improve this beaten-down industry’s outlook, and make it seem quite likely that consumers go back to concerts at a relatively healthy pace in 2021.
Of course, that’s big news for Live Nation — the events management company which makes most of its money through selling tickets to live events like concerts.
That business got destroyed in 2020. It could rebound in 2021. The chances of it rebounding in 2021 will be materially boosted by a Vaxtober Surprise.
Thus, considering LYV stock is presently 30% off its pre-pandemic levels, I say buying the dip in LYV stock here ahead of a potentially huge upward catalyst is the smart move.
Stocks to Buy: Benefitfocus (BNFT)
If you’re looking to play the labor market rebound on the back of a Covid-19 vaccine, perhaps the best stock to buy is Benefitfocus.
Benefitfocus offers streamlined digital solutions for benefits management. Obviously, demand for this platform fluctuates with the labor market. The healthier the labor market, the stronger the demand for benefits management solutions, and the better BNFT stock does. The converse is true, too.
Covid-19 has killed the labor market and BNFT stock. A potential vaccine could restore both.
To that end, a Vaxtober Surprise could act as a huge catalyst which shoots BNFT stock back to $15-plus levels.
Bed Bath & Beyond (BBBY)
Excluding Covid-19, I love Bed Bath & Beyond stock as an investment over the next few quarters.
A new management team — headed by the well-respected Mark Tritton who pioneered a powerful turnaround at Target (NYSE:TGT) — is executing strongly on sweeping changes at Bed Bath & Beyond.
It is closing underperforming stores, and redirecting those cost savings to improving the format of existing stores. It is building out a booming e-commerce platform with robust omni-channel capabilities. And it is leaning off of a discount-driven sales strategy, in favor of leveraging data to deliver better product assortments.
It is a smart turnaround plan which should improve the customer experience, boost reach and relevance, and preserve margins.
Throw in a potential Vaxtober Surprise to stimulate consumer spending at brick-and-mortar retail locations, and you have yourself a cocktail full of tailwinds for BBBY stock.
Ultimately, I think this stock can rebound to $20 in the foreseeable future.
Stocks to Buy: Six Flags (SIX)
Naturally, some of the biggest beneficiaries of a Vaxtober Surprise will be theme park operators like Six Flags.
Most theme parks are closed today. And even if they were open, there isn’t enough consumer confidence out there to really “fill up” the parks. They’d be operating at sub-50% capacity, and likely running losses given the huge upkeep and maintenance costs.
A Covid-19 vaccine will change that.
Consumer confidence will dramatically improve as it relates to coronavirus safety. Many consumers will feel at least somewhat comfortable with being in big crowds again. Theme parks will fill up. And companies like Six Flags will get back to somewhat normal business operations.
SIX stock trades about 55% off its pre-pandemic highs. To that extent, this stock looks ready to rip higher on a Covid-19 vaccine catalyst.
For a moment, it appeared that Covid-19 would be the death of ride-hailing services like Lyft.
But then numbers from across the industry broadly showed that once virus hysteria fades and consumer confidence is restored, ride-hailing demand can rebound back to pre-pandemic levels, like it has for Uber (NYSE:UBER) in Hong Kong and New Zealand.
All Lyft is waiting for, then, is virus hysteria to fade and consumer confidence to rebound in North America.
That will happen once a Covid-19 vaccine becomes broadly available in the U.S. And the outlook toward that happening will substantially improve if we do get a Vaxtober Surprise.
Accordingly, LYFT stock is a top stock to buy if you believe a Covid-19 vaccine is coming in October.
Las Vegas Sands (LVS)
Las Vegas feels like a ghost town right now.
Yes, it’s open. But for a city that is usually bustling with life and activity, it’s relatively quiet these days.
A Vaxtober Surprise will change that.
Consumers love to gamble and party. They are just afraid to do that right now because of the virus. A Covid-19 vaccine will significantly calm those fears, and unleash pent-up consumer demand to gamble and party.
Las Vegas casinos, restaurants, shows and clubs will fill back up. And the biggest companies in the city — like Las Vegas Sands — will see their fortunes turnaround.
So, with LVS stock 33% off its pre-pandemic levels, now may be a good time to start doing some bottom-fishing with this casino stock.
Stocks to Buy: Yelp (YELP)
Yelp does a lot of things. But, for all intents and purposes, its most common use case is as a centralized platform to discover and review restaurants.
Naturally, then, as the pandemic shut down restaurants everywhere, consumers stopped using Yelp, and started using DoorDash and Postmates for delivery instead.
This is not a permanent shift.
Consumers like to go out and eat. It’s an experience. It’s fun. And once they feel comfortable dining in again, they will.
A Covid-19 vaccine will go a long way in making consumers feel comfy dining out again.
To that end, a Vaxtober Surprise will meaningfully improve the outlook for Yelp app usage and restaurant and ad revenue over the next several quarters. As that outlook improves, beaten-up YELP stock could bounce back.
Urban Outfitters (URBN)
A Vaxtober Surprise will also breathe life back into malls, as it will restore consumer confidence in shopping in crowded locations.
The best way to play a rebound in malls in 2021 is by buying Urban Outfitters stock.
Urban Outfitters is the cream of the crop when it comes to mall-based apparel retailers. The company has super strong brand equity, with a portfolio of exclusive trend-forward clothes and styles that appeal strongly to young consumers. The company’s omni-channel business is also very robust, and the online business is booming. Comparable sales, revenue and profit trends have all been very favorable for several years (before Covid-19, of course).
Thus, as malls rebound in 2021, Urban Outfitters will be leading the way.
Yet, URBN stock today is still 30% off its pre-pandemic levels.
Stocks to Buy: Groupon (GRPN)
One of more interesting stocks to buy on this list is Groupon.
Yes. That Groupon. The daily deals site that has seemingly become irrelevant over the past few years thanks to inventory and usability issues.
But the company is in the midst of an enormous turnaround, wherein management is finally fixing those core inventory and usability issues by: 1) creating self-service tools for brands to create, manage and scale offerings; 2) launching new products outside of the company’s core deep discounts; and 3) leveraging data and machine learning to roll out, on the consumer side, CX improvements like map-based search, deal curation and service personalization.
At the same time, management is focusing this new-and-improved business model on the under-penetrated yet huge $1 trillion local services market, while also entirely gutting the expense model by roughly 30%.
In sum, these bold and aggressive actions give Groupon an opportunity to return to growth and improve its profitability profile.
Concurrently, a Covid-19 vaccine could recharge consumer interest in the local services spaces, as consumers return to restaurants, bars and gyms.
All in all, GRPN stock could be on the cusp of an enormous turnaround.
Planet Fitness (PLNT)
Gyms have been hit hard by the Covid-19 pandemic. Not only have they been shut down, but consumer trust in the safety and cleanliness of gyms has also eroded since it is, after all, a place where you’re touching the same stuff and breathing in the same air as dozens and dozens of other people.
But consumers love to work out. Indeed, we live in an era where consumers are obsessed with working out, staying fit and eating healthy. So all that needs to happen for gyms to fill back up is for consumer confidence in gyms to be restored.
A Covid-19 vaccine will go a long way in doing just that. By granting improved immunization, consumer trust in touching the same stuff and breathing in the same air as other people will improve.
Ultimately, consumers will return to the gym.
That is great news for Planet Fitness, one of America’s largest discount gym operators. PLNT stock is 34% off its pre-pandemic levels. You could easily see that stock rebound to pre-coronavirus levels in 2021 if we get a Vaxtober Surprise.
Stocks to Buy: Foot Locker (FL)
Foot Locker stock today is depressed because of two prevailing fears.
One, the Covid-19 pandemic continues to make shopping in physical stores challenging, and Foot Locker makes most of its money in such stores. Two, the athletic apparel industry is rapidly streamlining into a direct-to-consumer model, thereby squeezing out retailers like Foot Locker.
Both of these fears are overstated.
A Vaxtober Surprise will put the first fear to rest, and dramatically improve visibility to an improved, quasi-normal physical shopping experience in 2021. Meanwhile, although it is true that athletic apparel makers like Nike (NYSE:NKE) and Under Armour are reducing their sales to retailers and focusing on direct-to-consumer sales, Foot Locker is actually on the right side of this trend, because Foot Locker offers a differentiated, premium distribution channel for athletic apparel makers which will help them actually improve brand equity.
Thus, over the next few months, it will become obvious that FL stock should not be this beaten up.
And the stock will soar.
Last, but certainly not least, on this list of stocks to buy for a Vaxtober Surprise is Carnival.
The cruise industry has, of course, been decimated by the pandemic. But consumers want to travel again. They just don’t have the confidence to get back on a cruise ship with a bunch of other people.
A Covid-19 vaccine won’t restore that confidence overnight. But it will be a huge step in the right direction. And it will dramatically increase the outlook for cruise ships to be up and running with at least decent traffic volumes by mid-2021.
As that outlook improves, depressed CCL stock will rebound. Not by a little. But by a lot. The stock remains 70% off its pre-pandemic levels.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long KSS and UAA.