Particularly at this time of year, it seems ghoulish to focus on companies prospering from a horrific pandemic but from an investment perspective, it makes sense.
Covid-19 first started making an impact on investment decisions in the West around about mid-February 2020, with several stocks clearly benefiting as a result.
Some of these stocks have entered the spotlight because they have intellectual property that can be exploited in the battle to beat the coronavirus and some have done so because they provide services that are more in demand as a result of lifestyle changes enforced by the pandemic.
In the former category, we have the likes of Sareum Holdings PLC (AIM:SAR), Synairgen PLC (AIM:SNG, OTC:SYGGF), Avacta Group PLC (AIM:AVCT) and genedrive PLC. All of these stocks have more than quadrupled in price during the pandemic period.
Biotechs and the Sex-o-lettes
Sareum, up 1,220% since mid-February 2020, is the winner of the Covid steeplechase and thus the sexiest of the biotechs that have prospered during the pandemic.
Although primarily known as a drug developer addressing autoimmune diseases and cancer, its SDC-1801 candidate could prove useful as a potential treatment for the severe respiratory symptoms of Covid-19.
Once the coronavirus reaches the respiratory tract it can trigger a hyperactive immune response in some patients, leading to what is called a cytokine storm, inflammation and pneumonia. This can eventually lead to acute respiratory distress syndrome (ARDS), which afflicts some 15% of all Covid-19 cases and when it does, it is effectively a death sentence more often than not.
Synairgen, up 1,110%, is a respiratory drug specialist so it is a small wonder it has been on investors’ radar screens.
Earlier this month it presented in vitro data demonstrating antiviral activity of its lead asset SNG001 against multiple variants of SARS-CoV-2 and clinical biomarker data which showed inhaled SNG001 stimulates lung antiviral responses.
The company provided lab-based (in-vitro) data showing the interferon-beta ‘potently’ reduced the virus to undetectable levels in cells infected with SARS-CoV-2, including the alpha, beta and gamma variants.
Synairgen said it is currently assessing the drug against the delta and omicron mutations and will update as soon as the results are available.
Far from agnostic about diagnostics
Diagnostic specialists Avacta and genedrive have risen 345% and 322% respectively over the course of the pandemic, on the back of a rise in demand for quick, reliable tests.
Avacta’s AffiDX SARS-CoV-2 Lateral Flow Rapid Antigen Test was one of the main Covid-19 testing kits in the UK until the UK Health Security Agency introduced new regulations at the beginning of November that meant Avacta had to suspend UK sales. Happily, the company also sells the testing kit extensively abroad.
In the week before Christmas, Avacta revealed the test has received a CE mark for use as a consumer self-test in the UK and EU.
"We are progressing with our application to the CTDA [Corona Test Device Approvals] in order to put the AffiDx product on the market in the UK, as well as continuing to pursue commercial opportunities in Europe and further afield for the professional-use test,” confirmed Alastair Smith, Avacta’s chief executive officer (CEO).
Also applying for CTDA approval is genedrive, the molecular diagnostics company, which confirmed in the week before Christmas it has filed for approval to sell its Genedrive COV19-ID Kit in the UK.
CTDA regulations came into effect on 1 November and place-specific registration, review and performance requirements on suppliers of COVID-19 diagnostic products into the United Kingdom.
Genedrive said its kit has been proved to be successful at detecting the Omicron variant.
“The next milestone is approval by the Department of Health and Social Care; however, no assured timeline is provided on how long the review under CTDA regulations will take, given a current backlog in their reviews,” said genedrive's CEO, David Budd.
Delivered to your door
Enough of the biotechs, what about the stocks that are benefiting from societal changes brought on by the pandemic?
Two obvious winners are Gear4music Holdings PLC (AIM:G4M) and Naked Wines PLC (AIM:WINE, OTCQX:NWINF), both of which have prospered in a world where people are going out less often.
Gear4Music, which sells instruments and musical kit, has seen its shares triple since mid-February 2020 despite a bit of a stumble of late following a profit warning in November.
The company said performance in the fourth quarter had been a bit flat – Autotune will sort that out at the price of making the vocals sound like Stephen Hawking – due to Brexit-related supply chain issues persisting for longer than had previously been anticipated.
Naked Wines, meanwhile, goes from strength to strength. Never mind selling coals to Newcastle, the Norwich-based direct-to-consumer wine business is now selling Californian wines (and other beverages) to 43 states in the ISA.
Its shares have also come off the top in the last few months, with supply chain disruptions again cited as a concern. The company said it intends to run with higher stock levels going forward to make sure it can satisfy customer demand during the current supply chain disruptions.
It’s easy to say both of these companies have had their success handed to them on a plate because of the acceleration in the shift toward online purchases but a number of bigger, sexier names in the online world such as boohoo, ASOS and AO World have not found it so easy to cash in as many expected.
Talk of sexy names and Royal Mail PLC (LSE:RMG), despite the regal element to its nomenclature, is not one that comes to mind. Nevertheless, with the shares up 182% since February of last year, it is the FTSE 100’s best performer and thus has attained a level of glamour it last had when dandy highwaymen were the height of fashion.
“After several violent swings over the past few years, many investors understandably view Royal Mail shares with trepidation,” German bank Berenberg said in a note to clients this month.
Reports at the weekend suggested that the Christmas post could be hit by mass delays caused by Covid illnesses, so in that respect, the Omicron variant has put a dampener on sentiment towards the stock.
On the other hand, as Barclays pointed out last month, testing kits are a tracked 24/48 product so Royal Mail should benefit enormously from increased demand.