Three Stocks That Allow You to Take Advantage of Current Market Conditions

COVID-19 Stocks Show Limitless Promise

It’s looking like 2020 is going to be something of a lost year. Having spent the past four or so months in a state of semi-perpetual lockdown (and with little hope of that lockdown totally lifting before 2021), many people’s plans have been put on hold due to the COVID-19 crisis.

But not to be lost among the despair over what could have been, the stock market has done just fine in all that time. In fact, the market conditions created by COVID-19 have been beneficial for a number of industries (while also being extremely volatile).

And that brings us to my list of three COVID-19 stocks and the industries in which they’re found.

With the stock market surging despite the unprecedented and unpredictable nature of the current conditions, there are some very obvious ways to make healthy chunks of profit from COVID-19 stocks.

We currently have a sort of “Goldilocks” scenario here: three different stocks in three different industries, with one offering the highest risk for the highest reward, another offering more safety and more moderate gains, and third one  fitting right in the middle.

So let’s get to which stocks they are, and what makes them so well-suited to profit from the COVID-19 economy.

Chart courtesy of StockCharts.com

Moderna Stock, the Pharma Play

It’s hard to have any list of COVID-19 stocks without mentioning a stock whose fortunes are literally tied to the disease.

In this case, we’re talking about a pharmaceutical company. The pharma industry, as you’d imagine, has seen a deluge of companies seeking to create a vaccine or treatment for COVID-19.

Examining this scenario purely through a business lens, preventing or curing COVID-19 is a once-in-a-generation business opportunity. Not only is the demand global and desperate, but governments would line up on your doorstep with truckloads of cash if you were to deliver a COVID-19 vaccine or treatment.

So it stands to reason that many companies have attempted to take advantage of this situation.

How we develop a vaccine—whether via total free-market competition or via government-directed research and aid (or a combination of both)—is largely irrelevant.

It’s very much a leave-your-politics-at-the-door scenario, as the race for a cure will perhaps go down as among the most important medical developments of the past 50 years or so.

With all that on the line (and huge amounts of government funding at play), it stands to reason that pharmaceutical companies seeking out a vaccine would see huge stock gains.

And that leads us to the leader in the race for a vaccine, Moderna Inc (NASDAQ:MRNA). A lesser-known pharma stock at the beginning of 2020, Moderna has quickly become among the hottest stocks on the market right now.

It’s worth mentioning that Moderna received hundreds of millions of dollars of funding courtesy of the U.S. government, lending a lot of credibility to its vaccine development process and imbuing investors with a lot of confidence in Moderna stock.

What happened next is predictable: MRNA stock skyrocketed. As seen in the above chart, Moderna stock has surged by over 500% in the past 12 months. It’s fair to say that the company has become something of an overnight sensation.

Now, I’ve outlined my thoughts about MRNA stock in depth before. From a broader outlook, however, Moderna stock is the riskiest COVID-19 stock, but also the one with the most potential reward.

The risk is generated by the win-lose nature of the pharma industry. While there is a chance that multiple companies could develop multiple treatments or vaccines at roughly the same time, allowing the market to accommodate several winners, that scenario is rather unlikely. More likely is the zero-sum scenario: one company wins the sweepstakes, all others lose.

In this case, while Moderna Inc is in the lead right now, that could change. With so many challengers in this situation and so much at stake, there could be many wild swings.

And, as I mentioned, the winner is going to see huge, exponential growth. Picking the winner as soon as possible, therefore, would likely be the best thing investors could do for their portfolios in 2020.

Having said that, there’s a lot that could go wrong. While I put my confidence in MRNA stock at the moment, a failed test here or a faulty vaccine there could send share prices tanking in moments. Being beaten to market by a competitor would similarly be devastating to the company’s share price.

With that in mind, risk-takers should look into Moderna stock, but those seeking a more sure thing should probably steer clear.

Netflix Stock, Ol’ Reliable

The second stock I’d like to examine is in the dullest sector of the three stocks I’m discussing today. It’s in the group with the smallest chance of seeing huge gains, but with significantly less risk compared to the other two.

And that group is the tech giants. Companies like Netflix Inc (NASDAQ:NFLX) have exhibited strong financial growth this year, as you’d expect, with so many people stuck at home, with little to do for entertainment than stream videos.

Netflix in particular, relatively free from controversy while so many other tech behemoths have been staving off criticism from all sides, is a solid pick in 2020. Its share price has marked serious growth over the past 12 months: about 60%.

The problem with Netflix stock is that the company is large, and larger companies tend to grow less than smaller, newer, and more exciting companies.

In this case, NFLX stock isn’t likely to go anywhere anytime soon. People love video streaming, the content that Netflix makes continues to outperform its many competitors, and the company is only going to increase in market cap as the lockdown persists.

That being said, you just aren’t likely to see exponential growth from Netflix stock and companies of its size, but it does represent a safe and secure way to see strong gains moving forward.

Zoom Video Stock, the Balancing Act

The third of the “three bears” I’m highlighting today is Zoom Video Communications Inc (NASDAQ:ZM).

Zoom Video stock is nearing 200% in gains this year, as the company has pretty much become the undisputed champion of the online video call.

Being used for both personal and business purposes in our new, stay-at-home world, it makes sense that ZM stock would soar over the recent months.

While pharma stocks are direct COVID-19 plays, Zoom Video Communications Inc is more like the general store selling picks and shovels during a gold rush. Which is to say, Zoom Video stock looks like it will be steeped in gains for some time yet.

While NFLX stock is too large and old to reliably see exponential growth, and pharma stocks like MRNA stock are vulnerable to swings, ZM stock and other work-from-home-related stocks are undoubtedly in for a good ride.

Analyst Take

So there you have it: three stocks that allow investors to play the COVID-19-related market at their own comfort level.

Whether investors want to stomach the risk of the pharma market, play it safe with large tech stocks, or try to strike a middle path with emergent tech stocks, there are many options for profiting from the current market.