Need To Know Guide To COVID-19 Vaccines & Applying Investment Principles

Mike's been very kind to join us. Mike is an active member, obviously you guys see him in the chat in Amplify Live, but rather than, I guess, myself introduce Mike, Mike, why don't you tell us a little bit about yourself and how you trade and what you trade and add a bit of context before we kick off?

Yeah, sure. So, um, I suppose predominantly I'm a long-term investor, um, and I've been investing in companies for about 20, 20 years. I was giving my age away a bit, but, um, I did the Amplify course, uh, 2 and a half years ago, I think. Um, so, um, so I started trading, um, 2 and a half years ago, and now I do a little bit of intraday some swing trades, and investing. And I suppose my method is to try and sort of knit these things together.

One of the things that, you know, you've been incredibly useful for everyone has been whenever there's been a vaccine piece of information that's come out. Most of us are sat here scratching our heads going, what is that? What does it mean?

Is it important?

Is it not? How am I supposed to interpret that type of thing? What comes next, these kind of common questions. And I know you and I have been talking for the last week or two about how could we structure something to help with that specific objective. And so this is really the purpose then of, of this call is for you and I to thrash this out a little bit.

Yeah.

With the overall endgame being to equip people to be a little bit better prepared, let's say, for what is the logical steps to come. And then ultimately, what's the investment play on the back of that? And as you described, short-term, medium-term, and long-term, because there are some different things, elements to it.

Yes.

I'm sure we will— we're going to get to this at the end when we talk about the investment opportunities, because that in itself does bring up quite an interesting element about the time differential exiting from the pandemic, which offers opportunity on a timing sense of where to be overweight and underweight in the sense of if you were positioning in the right way. But just coming back to— there was a really great slide that you did, and obviously we'll share the document with everyone after this conversation. But it was factors in assessing vaccine. So this kind of fits now within my remit, which is more, right, if there's a piece of information coming out, what are the determining factors which then create some type of market reaction? Yeah, so if you could explain and elaborate on how you see that, that assessment process.

Yeah, so when I was thinking about this, you say factors in assessing vaccines, is when you hear a piece of news about a vaccine, I think you need to look at 6 different things. So the first thing is looking at what we just discussed is the regulatory process. So where is this vaccine that's being talked about in the regulatory process? And we talked about Phase 1, 2, 3, emergency use authorization, and full FDA approval. So the further it is along that chain, the quicker it's going to be used or approved as an actual vaccine. So, you know, Phase 3 is where the most advanced vaccines are, we're about to transition to emergency use authorization in the UK. If a vaccine is— you hear a piece of news about a vaccine that's in phase 1, it's a long way from becoming a commercial product, so you need to be aware of that.

Let's kind of skip forward then to the investment landscape. Yeah. And I guess from here there are a couple of different ways of looking at this. There's the— as you've kind of gone into by concluding with J&J, for example— there are looking at pharma companies specifically, and they've all got— they're in a different, I guess, type of technology they're adopting. They're in a different stage of approval or they're testing. So there's a timeline of that, and there's pros and cons. There's also then the the end result of what a historic event like this pandemic will mean for behavioural change in the way that people live their lives or go about, let's say, airline travel now and future for businesses, the adoption of different behaviour, you know, the whole kind of the pickup in certain pandemic plays that have obviously been evident over the course of the last several months. How many of those are long-lasting, and are there any? Patterns. And then there's the kind of the other, the other things, which is, um, as we talked about earlier, is there any in the next 12-month, 18-month period an opportunity for, um, I guess arbitrage between different areas as they come out of this pandemic and into a recovery? That the timing I think will be quite different, as you had said right at the beginning, the adoption of a more coordinated strategy in Europe comparative to disorderly in the US. Obviously, one would imagine then even under a new administration that there's probably going to be a uniform exit coming from mainland Europe rather than probably more fractured, just given the more federal state-level way of which the US operates. So is there opportunities as well there? So I guess we'll, um, we'll start it off then to get a bit more definitive. You mentioned there about J&J. So is there any one of these pharmas where you particularly think that they stand out head and shoulders above the rest? And that— I guess there's more like speculative trading over a short term. Like, I saw Moderna up again sharply yesterday. Yeah, there's kind of more speculative plays, but more long-term winners, I guess you could describe it as almost. Is that how you see it?

I find investing and trading in these pharma companies on the basis of the vaccines, I think, is really hard. So if you look at what's happened since the beginning of the year, if you look at the share price of AstraZeneca and Pfizer, they're basically flat on the year, so they haven't gone anywhere. And vaccines, because they do so many other things, vaccines are only ever going to be a small part of their portfolio. And AstraZeneca have already said that they will give their vaccine on a cost basis until the end of the pandemic. Now actually, they actually get to define what the end of the pandemic is, so they can actually take quite an aggressive approach. But I still don't see that necessarily for either Pfizer or for AstraZeneca, these are big game changers in terms of their finances. And for me, there isn't necessarily an investment case. I mean, I wouldn't buy or sell AstraZeneca on the basis of their vaccine. And I'm always slightly perplexed when I see these big moves in the Astra share price on basically a vaccine that they're producing at cost, at least to begin with, because it should have no effect either way. So I think Pfizer and Astra are tricky. Moderna potentially have the most to win because they're a small company, and this is going to be their big initial products, um, but Moderna is up 400% since the beginning of the year. So the question is, well, how much of this is already built into the Moderna share price? Now, am I a buyer of Moderna now? It's gone up 400% already this year on the back of this product. And I think, again, I think that's, that's really, really difficult. Um, uh, J&J, It would only ever— you know, J&J may eventually emerge as the winner here. I mean, they have lots of experience in making vaccines. They can make this vaccine fairly cheaply. They've got the distribution and manufacturing in place. And if they can get one shot to work, then obviously it's very easy to administer.

So let me pivot the conversation over to what has been a big talking point. Of 2020, which has been the phenomenal success of large mega-cap tech. And so the question then, as we go into the next phase of the pandemic, which is, let's say, looking top-level, focusing on the recovery story of 2021 and beyond, and the inevitable, let's say, controlling of the virus, which will come at some point, How does big tech— how do you play that from a big tech perspective over the next 12 to 18 months, given the spectacular performance that they have seen? Is it a continuation, or are we at a pivot point of— there's a lot of talk about rotation and these sorts of things.

I would draw a distinction between big tech and stay at home. I think they're slightly different things. So if you take big tech, you know, I look at Amazon and I think— I ask you the question and everyone I know the question— where are you going to do your Christmas shopping? And I think we all know the answer to that. It's going to be an Amazon Christmas, both for people doing the shopping and for Amazon shareholders. I think it's going to be a great Christmas. And I look at Amazon and they're just so good at what they do. They move into areas, they're ruthless. They are better than the people they're competing against, and they're there for the long haul. So that, you know, as we were saying the other day, they are the Death Star. They are unstoppable. They will keep going. And they're not just the stay-at-home trade. So I'm very, very confident about Amazon. If you look at Google and Facebook, you know, where does their advertising come from? So Google, I think, where do holiday companies advertise? They advertise on Google. So even when you get— when leisure comes back, airlines, travel, Google are going to be a big beneficiary in terms of advertising. I look at Apple, slightly under the radar at the minute, but they've got this new M1 chip technology in their desktops and laptops. That is going to be, in my view, massive, slightly not looked at at the minute, but they've basically produced, you know, a $900 laptop that outperforms $3,000 laptops because of this new chip architecture. So I, you know, look at Apple, Facebook, Google, Amazon. I just think they will continue to advance. They will continue to be unstoppable. But I don't necessarily think that of the rest of the stay-at-home trade companies. That's where I'd start. I draw a distinction between big tech and stay-at-home.

I'm always conscious of being biased, confirmation bias and position bias. So that's why I have a healthy circle of people and fantastic analysts like Anthony Cheung.

So, okay, good.

Educational element then on the back of that discussion is— so you mentioned there about one approach to making sure that the investment remains rational is not just keeping it contained within your own mindset, perhaps then talking to other people to get, uh, different types of views. Where is the sentiment on a grander scale? Is there anything else then as a trader that you do to sanity check then that you are not doing what, as you describe, confirmation bias, position bias, these other things? What would be a practical way to increase that self-awareness?

Absolutely. This kind of brings me back to this thing. I might go off a little bit here, but Japanese— let me take you to the Japanese railway system. And they had a recurring issue with people falling into the gap. Before the trains went off, because it's hyper busy train station, a train network. And they introduced this one simple thing for the conductors on all the carriages, and it's see it, say it, confirm. And this solved this problem of injuries and deaths on the network by a massive percent, right? The conductors would get off the train, watch everyone else get off, and then they would walk the length of the carriage pointing at us and get to the end and say, "Clear, ready to go," and they give a thumbs up. So this brings me back to my answer, which is the way I try to stay grounded is I have a hypothesis and I wait until I see it happen on the price action. So like with, with, I was, deeply long silver ETFs on coming into the election, trying to hold it over the election. And I had really pretty simple but decent technical analysis on it. So I was positioned and I had a comfortable, like a nice stop. I wasn't really going to sweat the trade too much. And for the following 2 days, I just couldn't see the trade happening. I I just couldn't see the interest there on the tape. I just couldn't see those buyers in. Whereas, you know, Eddie was on to me about Zoom the other day. It was down about 400 or so, 390s. And I was like, let me have a look. I looked at my chart and I remember when it first traded below 390s and then it traded above, I made a note on the chart. Buyers at this level. And so when it pulled back and Eddie was like, what do you think here? It's like, yeah, this buyer is at this level. And sure enough, we're trading what, 420 or whatever, 440s on Zoom now, and there are buyers at that level because I, I could, I could see it on the tape. It pulls into the 400, it rockets up. And so you can see this with, with markets on futures, any market intraday if, if you have a decent level or an area, you need to see those buyers there picking up off of that level. And that's kind of how I stay grounded. Like, if I can't see it, uh, you know, I'm just— I'm gonna get out of it. And I say this to my group all the time. I'm like, you know, if you get in at a level and you're expecting to see something and you don't see it, well, you don't need to be there anymore. And I think that's kind of a mantra I've held true across equities, ETFs, everything, futures. I don't know, Mike, what, you know, to balance out my mantra, what do you kind of look for to stay sober, if you like, in the market?

Um, yeah, I mean, I think, I think we trade probably fairly differently. I mean, I don't really use technicals in the way that So you probably use them. And, um, I don't trade that much intraday now unless— so, so, uh, rather like, I suppose, a little bit like Anthony, I have a— I try to construct a view of the world on a macro basis, and then I'm looking for, for, um, entries into stocks where I think it has, or products rather, that have incorrectly deviated from my view of the world.