By Geoffrey Smith
Investing.com -- It looks like it’s ‘third time lucky’ for those willing to bet on an end to the pandemic.
The rallies that followed announcements of vaccine breakthroughs by Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) in the last couple of weeks both reversed to a large extent almost immediately as investors were shaken by the spread of the virus in the here and now.
However, the third such announcement, by AstraZeneca (NASDAQ:AZN) and the University of Oxford, on Monday appears to have tipped more people into believing that the end of the tunnel is not only in sight but getting significantly closer.
Concerns about the difficulty of storage and distribution had undermined the Pfizer rally, while Moderna appears to have prioritized price over mass distribution, something that limits its effectiveness on a global scale. But the AstraZeneca/Oxford drug is both cheaper and easily stored. It’s set to reach more countries, faster, as a result, once it is fully approved.
The effect was clearly visible in Europe’s stock markets on Tuesday, with cyclical stocks sharply outperforming at the expense of stay-at-home stocks and other tech winners. The contrast was illustrated beautifully in the fortunes of two London-listed stocks, catering group Compass and electronics retailer AO World.
Compass, the world’s biggest contract caterer with a business spanning not just hospitality and events but university, defense and oil rig canteens, has had a miserable year. The shares lost 40% between the eve of the crisis and the low point that was made when it had to raise capital through a share offering. There’ll be no dividend for the year that ended in September and the road back to its pre-pandemic state of health is a long one. CEO Dominic Blakemore said the group’s operating margin will be only 2.5% in the current quarter, although he noted that the reset of its costs will allow a margin of 7% even without the full return of pre-Covid business volumes.
Compass shares rose 5.0% to their highest since March as the group released its results for the year. Some fortuitous timing may have helped: Prime Minister Boris Johnson late on Monday confirmed the lifting of the national lockdown in England from December 2, although graded restrictions are likely to remain in place until March.
Compass’ performance found its mirror image in that of AO World. The retailer of computers and related equipment has had a fantastic eight months, as workers sent home have found the perfect excuse to upgrade their laptops and PCs, as well as buying more accessories for gaming. Revenue rose 53% in the six months through September and the group returned to an EBITDA profit of 16 million pounds, having largely fixed problems with its German stores.
The market, however, reckoned that this may be as good as it gets for AO. The shares fell 6.2% to a two-week low. The stock’s daily chart now has an ugly-looking double-top pattern to it.