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Why I Didn't Jump on the Coronavirus Vaccine Stock Bandwagon

By Maurie Backman - Mar 22, 2021 at 6:36AM

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Many people have rushed to invest in vaccine markers. Here's why this Fool didn't.

When the coronavirus outbreak exploded last year, it quickly became clear that mitigation measures like social distancing just weren't going to cut it. After all, in the absence of completely locking down nations across the world, there was just no way to contain COVID-19 to the point where it could fizzle out. Rather, health experts made it pretty clear that we'd need vaccines to dig out of the pandemic. And now, one year later, there are a number of viable candidates on the market, and shots have been going into people's arms at a steady clip since the start of 2021.

At several points later year, I was tempted to get a piece of the vaccine stock action by buying shares of Pfizer (PFE 1.50%) or Moderna (MRNA -1.20%). But here's why I didn't.

It's all about sticking to a strategy

Some people aim to buy stocks they think they can make a quick buck on. But that's never been my approach to investing. Instead, I like to follow a strategy called buy and hold -- scoop up quality stocks with solid growth potential and hold them for many years with the hope that in time, they'll gain value.

Woman in mask and gloves holding tray of vials labeled covid-19 vaccine

Image source: Getty Images.

At the same time, I like to make sure I'm invested in a diverse mix of stocks. That way, I'm not putting all of my eggs in one basket -- if one segment of the market takes a hit, my entire portfolio won't tank at once.

It's these very principles that prompted me to avoid buying vaccine stocks. While Pfizer is a company I believe has growth potential, I didn't need it in my portfolio. The reason? I already owned shares of Johnson & Johnson (JNJ 0.70%) well before the pandemic.

Now one thing I like about both Pfizer and Johnson and Johnson is that they're not just coronavirus vaccine makers -- both have been putting out a host of pharmaceutical products for years. But since I owned Johnson and Johnson, I didn't feel the need to add what I felt was a comparable pharmaceutical stock into my personal mix, and so I stayed away.

Now let's talk Moderna. Unlike Pfizer and Johnson and Johnson, Moderna hasn't been around that long -- it was formed in 2010. And if I'm being honest, the name hadn't even crossed my radar until its coronavirus vaccine formula started getting heavy media coverage.

At that point, I was both tempted and intrigued. But I ultimately stayed away for one reason -- I'm not convinced Moderna has great growth potential. Sure, it has its coronavirus vaccine going for it, but it doesn't have a robust pipeline of revenue-driving drugs like some of its counterparts. And while I recognize that there's lots of profit to be made within the coronavirus space, at some point, I'd like to hope there won't be a need for those vaccines.

Even if coronavirus vaccines do become the new flu shot -- something you take every year -- in time, more players could enter that field. And so while I think Moderna has the potential to be very profitable in the near term, I'm not convinced it's positioned for long-term growth.

Refusing to veer

Some of the people who know me well would be quick to call me stubborn -- when I get an idea in my head, I stick with it. Such is the reason I didn't end up buying coronavirus vaccine stocks despite the potential upside involved. I'm comfortable with the investing strategy I've set for myself, and I don't feel the need to veer off-course. And while I'm eager to get an actual coronavirus vaccine, I don't feel that I'm missing out on much by not having bought vaccine stocks.

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Stocks Mentioned

Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$178.08 (0.70%) $1.23
Pfizer Inc. Stock Quote
Pfizer Inc.
PFE
$50.67 (1.50%) $0.75
Moderna, Inc. Stock Quote
Moderna, Inc.
MRNA
$136.26 (-1.20%) $-1.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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