The Ultimate Covid Vaccine Beneficiary

 

 

Everybody loves a good “cocktail party” stock – that little-known company on which you recently took a flyer, the one they told you would become the “next Amazon” and make you a fortune in the process. The type of long-shot play that piques the interest of those around you.

Not that there’s anything wrong with that, of course. Even as a former advisor, I think it’s just fine – maybe even prudent — to occasionally swing for the fences, as long as you allocate your funds appropriately. Keep in mind, though, that these highly speculative trades are just that: highly speculative.

But that doesn’t mean we shouldn’t try.

Today, I want to help you find one of those sexy, little-known, cocktail party stocks that will make you the talk of the town, not to mention pad your brokerage account. And I want to do it in a way that will help improve your odds of success. With this strategy, you will have a much better chance of actually making money on this type of investment.

Stealing A Secret from The California Gold Rush

After an estimated 300,000 prospector wannabes stormed California in the mid-1800s in search of gold, most never hit paydirt. Yet, one group of savvy entrepreneurs made money regardless of whether the miners struck gold. I’m talking about the folks who sold them the tools of the trade… the picks and shovels.

And I think that’s one of the best approaches — the “picks and shovels” tactic — for finding that golden needle in the haystack.

It’s a simple approach that has yielded big results…

In early 2014, for instance, payment technology was all the rage. We had Apple Pay, Google Wallet, PayPal, and ISIS Mobile Wallet all vying for supremacy. With the use of near field communication (NFC), all it took was a simple tap of the credit card or mobile phone to pay for purchases.

While the biggest focus was on Apple Pay and Google Wallet, folks who dug a little deeper found an even better play with “picks and shovels” supplier NXP Semiconductor (NXPI), which was providing the NFC technology to Apple and other companies. In the 13 months ended in May 2015, shares of this under-the-radar company more than quadrupled, crushing the market and outperforming Apple and other big boys in the process.

The beauty of this strategy is that it works in nearly every industry. I’ve had success with it in the energy market, healthcare, technology — you name it. In each instance, I’ve dug a little deeper to find one of the main suppliers feeding whatever boom was underway at the time.

And once again, I’ve found a company that most people likely haven’t heard of. Yet, it’s a firm that’s had a hand in nearly half of the new drug products approved by the U.S. Food and Drug Administration (FDA) over the last decade.

 

 

It works with healthcare industry stalwarts such as Pfizer, Johnson & Johnson, GlaxoSmithKline, Novartis, Roche, and AstraZeneca – all of which are customers.

The company is Catalent (Nasdaq: CTLT), and it works behind the scenes for large biotech and pharmaceutical companies to provide and/or develop biologics (a product derived from living organisms) and consumer health products.

The firm’s deep expertise in product development helps its customers take products to market – read, make it through the three-phase FDA approval process — faster.

Annually, Catalent produces roughly 73 billion doses for nearly 7,000 customer products. Put another way, Catalent has a hand in one of every 20 doses of such products taken each year by patients around the world.

In fiscal 2019, the company worked with 83 of the top 100 branded drug marketers, 21 of the top 25 generics marketers, 23 of the top 25 biologics marketers, and 21 of the top 25 consumer health marketers globally.

As I mentioned, Catalent’s key customers include some of the biggest drug-makers in the world. And here’s the thing… when you’re investing in a “picks and shovels” company like Catalent, it doesn’t really matter which pharmaceutical company comes through with the next blockbuster vaccine or drug.

This is especially true when it comes to the highly anticipated vaccine for Covid-19.

For instance, Moderna (MRNA) has tabbed Catalent to help with its Covid-19 vaccine candidate called mRNA-1273. Catalent will provide vial filling and packaging capacity, as well as clinical supply services to support Moderna’s vaccine.

Moderna isn’t the only company collaborating with Catalent. In June, Catalent and AstraZeneca (AZN) formed a partnership for similar services — vial filling and packaging — as well as preparing for large-scale commercial supply of the University of Oxford’s adenovirus vector-based Covid-19 vaccine candidate, AZD1222.

And don’t forget, Catalent already has partnerships with Pfizer (PFE), Johnson & Johnson (JNJ), and GlaxoSmithKline (GSK) — all companies with Covid-19 vaccines in the works.

While Catalent isn’t a household name, neither is it a penny stock. It’s an established company that generates more than $3 billion in sales annually (fiscal 2020 figures), and it’s growing that figure at a fast clip. When the company reported its fiscal 2020 results in August, sales were 23% higher than the previous year. Operating income for the quarter jumped 30.6% year-over-year, and it generated $173 million in profit.

So, regardless of who wins out on the vaccine front, “picks and shovels” firm Catalent should benefit one way or another. While most folks will be clamoring over which company might come out with the vaccine, Catalent will be quietly helping them all, collecting cash, and rewarding shareholders.

Action to Take: Consider buying Catalent under $100 a share. Begin taking profits as vaccines start getting approved, or when you’ve notched a 50% gain, whichever comes first.