Tuesday was a wild day on the ASX following the announcement of a potential Covid-19 vaccine.
Although, depending on your sector allocations, this news might’ve resulted in some pretty unexpected price movements and your portfolio might not be looking too healthy right now.
Who were the winners on Tuesday?
It should come as no surprise, but ASX shares/companies that rely on international travel have all seen big jumps in selling prices. Some standouts include Flight Centre Travel Group (ASX: FLT), up 9%, Webjet Limited (ASX: WEB), up 13.5%, Corporate Travel Management Limited (ASX: CTD), up 15.83% and Scentre Group (ASX: SCG), up 14.52%. You can click on their ticker codes to see the share price movements.
Who were the ASX losers?
ASX retailers were among the hardest hit on Tuesday, including Temple & Webster Group Ltd (ASX: TPW) down 20.56%, Kogan.com Ltd (ASX: KGN) down 17.11%, Redbubble Limited (ASX: RBL) down 20.04%, and interestingly Domino’s Pizza Enterprises Limited (ASX: DMP), down 11.15%.
On Monday, the NASDAQ had some constituents that significantly underperformed, such as Palpay, Netflix, and Peloton Interactive. ASX tech stocks subsequently suffered the same fate on Tuesday, with NextDC Limited (ASX: NXT) down 13.88%, Afterpay Limited (ASX: APT) down 10.86% and Appen Limited
(ASX: APX) down 8.89%.
Anyone with exposure to gold also probably didn’t have the best day, as gold is generally negatively correlated with equity markets.
I also feel for all the Zip Co Limited (ASX: Z1P) holders out there – no rocket emojis today (again).
Is this a buying opportunity?
Deciding whether or not to buy now is a hard question to answer. I think it would depend on the individual stock, but in my eyes, there are some quality companies operating on the same fundamentals that are now trading at a 20% discount.
For others, I think it’s still really hard to argue for a bargain even after this recent sell-off. Take Temple & Webster for example, which was trading on a P/E ratio of 104x based on FY20 earnings, just a few days ago. After Tuesday’s sell-off, it’s current P/E is around 82, still expensive by most investors’ standards.
NextDC has pulled back nicely and I’d be happy to buy some shares at this level. Click here to read my in-depth analysis of NXT shares on why I’m liking it at the moment.
What could go wrong
Some of these retail stocks have had a really good run up until this point, so if you choose to buy the dip, there’s the chance that some of these may keep on dipping.
Markets tend to overreact to new information and in this case, it’s no exception. It might be still six months before we’re allowed to fly overseas again, so it’s still very early days. Why did Domino’s get sold off so hard today? Will people stop eating pizza when we can travel overseas, which still might not happen for several months?
I know it’s probably more likely that investors in retail have hit the sell button so they can quickly jump into the recovery stocks. Whatever the case is, the stock market can be truly bizarre at times.
For some further Covid-19 stock ideas, here are my 3 favourite ASX stocks at the moment. I think they could benefit from the gradually reopening of the economy. Have a read for yourself and consider their prospects.
