Novavax (NASDAQ:NVAX) ran up an incredible 2,900% in 2020. Despite that amazing run, many investors are still bullish about the stock in 2021. In this video, healthcare bureau chief Corinne Cardina and Motley Fool contributor Taylor Carmichael discuss the top healthcare stock of 2020.

Corinne Cardina: Let's talk about number 1. So number 1 to nobody's surprise is Novavax. This is the largest company of the five, probably the most proven. It already had positive phase 3 results for its flu vaccine candidate called NanoFlu. It was shown to be superior to Sanofi's (NASDAQ:SNY) that is on the market. Those results came out in the Spring, so definitely contributed to its run-up in 2020. It got $1.6 billion from the US government to develop its COVID 19 vaccine candidate. The stock is up 2,700 percent in 2020, it is almost to an $8 billion market cap. Taylor, what is one green flag and one red flag for Novavax?

Taylor Carmichael: The green flag for Novavax, it's COVID 19 stock last year. The flu vaccine helped them. But mostly I feel like it's the expectations for COVID 19 because to vaccinate successfully would be huge. There are distribution issues with vaccines that are on the market now, with Pfizer's (NYSE:PFE) drug and with Moderna's (NASDAQ:MRNA) drug because they require the drugs to be frozen, to be kept very cold. Novavax potentially; if the drug is approved or they get emergency use authorization, they could take a lot of market share. That has always been a bullish case that Novavax is still the smallest company among the top-tier vaccine candidates, and they have as good a shot at anybody. We're waiting on phase 3 data from the UK. If they get positive data, get like Moderna, Pfizer, over 90 percent. It's already had a huge run-up, and it's not going to do another 2,700 percent in 2021. But I'm always happy when I get a double or a triple or a quadruple. The potential is there for significant gains, but we don't have the data yet. We're waiting and it will happen this quarter in January, February, March. It's going to happen. They're going to give us the data from a phase 2 test in South Africa and Australia, and a phase three test in the UK. Particularly the phase 3 one in the UK is critical for Novavax because, with that, you can probably get a EUA in the United States. Certainly, you would get approval in Europe and the rest of the world, and they have a lot of distribution agreements in place. So it's all hinging on that phase 3 trial. It's very risky in the short-term if they have bad news, it'll get hit hard, but the upside is substantial. I would argue also in the long term that Novavax is a strong buy because they do have a flu vaccine, and they do have a good program, even if they have short-term disappointment. So I think it's still a good stock to buy.

Corinne Cardina: Absolutely. So even though they do have the flu vaccine, it's acting a little bit like a binary biotech at the moment. We're waiting on that data. They've said they could combine COVID 19 and flu vaccine. But obviously, if the COVID 19 vaccine data doesn't look good, that evaporates as well. We have two minutes left. Let me quickly ask you which you think is the best buy going into 2021, while we're here? In 2021, for the year and beyond, which one is the best?

Taylor Carmichael: I would say Novavax and just knock on wood. I hope I don't jinx it. This is the largest of the companies on the list, but they are also in a very strong position in terms of finances, they are strong in terms of their science. I'm just a big believer in Novavax, so that would be my top take out of this group.

Corinne Cardina: Excellent. Can I ask you, what is one takeaway for investors who are thinking about buying healthcare stocks in 2021?

Taylor Carmichael: I would say, do your own research always and look for companies in phase 3 trials. We have phase 3 trials upcoming. We have big pharma partners. We have a lot of cash, and be prepared for ups and downs. When you get a winner, don't sell it, just hold on to that sucker. Just keep writing it, and you'll do really well.

10 stocks we like better than Novavax
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Novavax wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of November 20, 2020


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.