It's not surprising in the least that the stocks of several companies in the race to develop coronavirus vaccines have been sizzling hot so far this year. Global pandemics don't come around very often. It makes sense that investors would flock to the stocks of the drugmakers that could potentially help return life to normal.
Novavax (NVAX 1.27%) especially stands out, with its shares skyrocketing more than 3,000% so far this year. Some investors have made a fortune on the small biotech stock. But which COVID vaccine stock has been the biggest millionaire-maker? It's Johnson & Johnson (JNJ 2.40%) -- by far.
Making investors rich for a long time
To be sure, you'd have to go back several decades for Johnson & Johnson to deliver the same level of return that Novavax has in less than a year. The fact is, though, that J&J has been making investors rich for a long time.
The healthcare company was privately held for its first 58 years in business. J&J first listed its shares on the New York Stock Exchange in 1944, near the end of World War II. My Motley Fool colleague Taylor Carmichael calculated that an investment of $10,000 in J&J's IPO back then would have been worth more than $96 million by the end of 2019. The stock has risen modestly in 2020, adding to the total.
That $96 million figure is actually on the low side for another reason. Taylor only looked at stock appreciation factoring in stock splits. But Johnson & Johnson is known for its strong dividends. It's a Dividend Aristocrat with a track record of 58 consecutive years of dividend increases. With reinvested dividends included, J&J's total return since inception would be significantly higher.
But you wouldn't have to start with a $10,000 investment in 1944 to become a multimillionaire owning Johnson & Johnson shares. Let's assume that you instead bought the stock in 1980. Here's how J&J stock performed along with its total return including reinvested dividends during that 40-year period.
Assuming you bought and held J&J's shares and reinvested those fantastic dividends along the way, your initial $10,000 investment would have grown to nearly $2.4 million today. Holding a stock for 40 years -- roughly the span of an average career -- isn't an impossible task. There are likely quite a few retirees who did just that and are glad they did.
Other drugmakers with COVID-19 vaccine candidates have also been around a long time and have been big winners. However, none of them come close to delivering the staggering long-term returns that Johnson & Johnson has.
J&J's COVID-19 vaccine prospects
Sure, Johnson & Johnson hasn't been as much of a millionaire-maker lately. It isn't one of the sizzling-hot coronavirus vaccine stocks this year. J&J hasn't generated nearly as many headlines as other companies such as Pfizer and Moderna. Don't be surprised, though, if J&J blows past the other COVID vaccines.
Unlike all of the other coronavirus vaccines in late-stage testing, J&J's candidate requires only a single dose. It also doesn't have any ultracold storage requirements. Last, but certainly not least, J&J (along with AstraZeneca) has committed to selling its COVID vaccine at cost during the pandemic.
The big question for J&J's vaccine relates to efficacy. Pfizer and Moderna have set the bar high with efficacy rates of 95% and 94%, respectively, for their coronavirus vaccines. If J&J comes close to this level, though, governments around the world will likely be knocking on the healthcare giant's door with supply deals in hand in addition to the agreements the company already has.
After the pandemic is over, by the way, J&J's commitment to sell its COVID vaccine at a steep discount will expire. Over the long run, the company could generate significant profits from its promising vaccine.
Two key lessons
There are two key lessons that I think investors should take away from all of this:
- A long-term perspective is paramount in maximizing your gains.
- Dividends make a huge difference over time.
Johnson & Johnson has made many investors wealthy over the long run, even though it hasn't generated great returns every year. I suspect that there are many investors who bought the stock in 1944 or in 1980 and sold well before they made anywhere close to $1 million. If they had held on and kept a long-term perspective, their fortunes could have been much better.
Go back and look at that chart shown earlier with J&J's stock gains plus the total return. It's amazing how much reinvesting dividends can increase your returns over the long run.
Could Novavax or one of the other hot COVID-19 vaccine stocks eventually be millionaire-makers like Johnson & Johnson? It's possible. But J&J has established a record that's going to be hard to beat.