How to play the next Covid-19 data release

In today's Exponential Investor…

Accelerating the recovery
Prepare for good or bad
Trade this smart and you'll do just fine

The great pharmaceutical giants have saved humanity.

We are saved!

Everything is going to be fine now. We can all fly in planes again, cruise on ships, drink pints at pubs, watch Hollywood blockbusters at cinemas.

It's all thanks to our saviours – big pharma.

Well, yes and no.

Yes, in the fact it appears the vaccine from Pfizer for Covid-19 works. No, in the fact that everything would have been okay anyway.

Regardless of a vaccine, the world would have moved beyond the events of this year and been just fine. However, now there is a vaccine, the acceleration of that recovery to "normal" is happening a lot faster.

Now I do say "normal" but reality is things will never be normal. Even before Covid-19 things weren't normal. The world isn't a normal place. It's always weird, whacky, unpredictable and uncertain.

How much you buy into the uncertainty and unpredictability is another thing. It's the aspect of all this you can control and that will determine if you've used 2020 wisely or wasted it.

Hold fire, but ready for launch

There's no doubt the announcement from Pfizer kick-started belief across the world that we will recover from all the garbage 2020 has thrown at us.

Of course, we've been telling you this since it all began.

Nonetheless, the Pfizer announcement was indeed the jolt the market needed to wake up.

However, while a number of stocks in Covid-beaten industries (such as those we made note of yesterday) have already shifted up a gear, the question remains, is it too late?

Well the good news is it's not.

And here's why…

The announcement from Pfizer says,

… the evaluable case count reached 94 and the [Data Monitoring Committee] performed its first analysis on all cases.

That's important because it also says that, "The trial is continuing to enrol and is expected to continue through the final analysis when a total of 164 confirmed COVID-19 cases have accrued."

It's about half way through. Which means the next cohort of results may sway the numbers. That's going to be a significant data point release and it's going to shift the markets… all markets.

We should prepare for that.

There's also another important note in the Pfizer announcement that needs consideration.

The first is this part:

As the study continues, the final vaccine efficacy percentage may vary.

What that's saying is that after the full administration and monitoring of participants, the outcome is the efficacy could be less than the initial results indicate. In fact, I would expect that as the numbers add up for the data monitoring and time passes for those being monitored, the final efficacy will fall.

The hope is it's not going to fall by much and the protection of the vaccine extends to at least a year.

I'd prepare for a lower efficacy rate.

Estimates are that the "flu jab" that's widely available for the various coronavirus flu strands has an effectiveness of anywhere from 19% to 60% in any given year. A study by the US Centers for Disease Control shows that in 2010-11 the flu vaccine had an effectiveness percentage of 60%. In 2014-15 it found that effectiveness was 19%.

The most recent data set in 2018-19 suggests an effectiveness of 29%. Now just consider what would happen if it proved this Covid-19 vaccine was just 29% effective.

I'm not saying it will, the current data suggest not. But in decades of developing a flu vaccine, the best it can do is 19% to 60%.

The Covid-19 vaccine needs to be better than that to properly restore confidence to the world. The initial 90% efficacy even surprised Pfizer's CEO. I would think his surprise is sufficient to think the next time we get data from this trial the number of efficacy will be less.

We should prepare for that.

The announcement also says,

Pfizer and BioNTech are continuing to accumulate safety data and currently estimate that a median of two months of safety data following the second (and final) dose of the vaccine candidate – the amount of safety data specified by the FDA in its guidance for potential Emergency Use Authorization – will be available by the third week of November.

That's next week.

Again, we should prepare for another major announcement that's clearly going to be market sensitive next week.

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Use the right strategy

Here's the tricky part with all of this.

You can trade these announcements. From what we saw on Monday, the world is now hanging on any new data to come from this trial. If the data sees those efficacy numbers decrease, it will rock the confidence that things can return to what they once were.

If the data holds up for the next release, the markets will get a huge kick in the pants again higher – at least, that's what I'd expect.

You can trade both side of it, depending on how you think these numbers will come out. My own personal view is the 90% number won't hold up. I don't expect it to be as low as the effectiveness of the flu jab – but I am expecting it to be lower than 90%.

If that's the case, there will possibly be another buying opportunity for short-term traders.

Of course if I'm wrong and the data is good, or better than we saw on Monday, all the stocks that have been beaten down by this year's drama will bounce again.

However, there's an easy way to play it smart – that's to apply the information I've been telling you about the last couple of weeks. If you're a long-term investor, you can drip feed into the market to smooth your volatility.

You can take positions on both sides of the news flow to ensure you're not dramatically hit either way. That's called risk management and it's how I'd consider playing this.

We simply don't know what the next data will say. But if you have the right strategy to play it, and the right investment time horizon, you can still pick winners from a market that's now seeing some confidence flow back in after a horrendous year.

Regards,

Sam Volkering
Editor, Exponential Investor

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Rabu, 11 November 2020