Last week, Pfizer Inc. and BioNTech SE announced their coronavirus vaccine was found to be more than 90% effective.
This morning, Moderna Inc. one-upped them, announcing its vaccine was 95% effective.
While shares of travel and leisure stocks such as hotels and airlines rallied sharply on the news, tech investors weren’t as happy to see the light at the end of the tunnel.
The vaccine won’t be available until the end of the year, but tech investors were already feeling inoculated against gains.
The tech-heavy Nasdaq composite was flat last week, while the Dow Jones Industrial Average and the S&P 500 Index finished with 4% and 2% gains, respectively.
The Pfizer news sent shares of Planet Fitness Inc. (NYSE: PLNT) up 16%.
Mall real estate investment trust Simon Property Group Inc. (NYSE: SPG) climbed 29%.
And movie theater chain AMC Entertainment Holdings Inc. (NYSE: AMC) stock was up nearly 50%.
For a brief moment, it felt like happy days were here again for value investors, who have been pummeled this year.
But don’t disregard tech’s progress.
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Although the coronavirus might be a thing of the past by this time next year, technology’s gains are here to stay…
Our Groundhog Day Is Almost Over
Some days, I feel like Bill Murray in Groundhog Day.
I haven’t traveled in almost nine months, and my old schedule of conferences and company visits has been reduced to watching online presentations and Zoom calls.
Our offices are only partially open, and that’s left more time for me to think about whether I need a few trees removed from the backyard.
While I can’t wait for normal life to resume, there are some pandemic behaviors I may never change.
For instance, I would be OK with never seeing the inside of a grocery store again.
It’s not that I don’t enjoy grocery shopping. I simply find the whole process wildly inefficient.
I also have better ways to spend my workday evenings than battling hipsters for the last carton of oat milk.
Like many Americans, I’ve opted for Instacart this year, which lets me order groceries online and either have them delivered or picked up curbside.
The most convenient part is that my weekly staples — bananas, avocados, eggs, etc. — can be reloaded right into my virtual shopping cart, saving me the hassle of playing Supermarket Sweep.
Businesses Are Investing in the Digital World
The accelerated rise of online grocery shopping is just one of the many ways that new technologies have proliferated in COVID-19’s wake.
And they’re not about to disappear anytime soon.
There are many tech components to getting an online grocery order to your doorstep.
Cloud storage companies such as CrowdStrike and Datadog keep a history of previous orders.
Payment platforms such as Stripe and Plaid process credit cards via mobile apps.
And machine learning companies such as Splunk and Elastic help companies personalize their user experience.
Businesses are also accelerating into tech, investing more in the digital world of software and analytics and spending less on office space and company cars.
This can be seen on a chart of digital versus physical spending:
These Aren’t Your Dad’s Tech Stocks
Of course, when you look at the skyrocketing prices of tech companies, it’s easy to think it’s just another dot-com redux.
This couldn’t be further from the truth.
Back in 2000, tech was nearly 35% of the S&P 500’s value and only 7% of gross domestic product (GDP).
Today, tech accounts for 27% of the S&P 500 and 17% of GDP.
And the fact that the world is accelerating toward digital means that mega tech companies such as Amazon, Microsoft and Google have become the new defensive sector.
In the past, when citizens were scrambling for toilet paper and paper towels, investors would pile into consumer staples stocks for their ability to earn money in recessions and pay steady dividends.
However, these aren’t your dad’s tech stocks.
Microsoft and Google both trade for 35 times this year’s earnings, which is only about 10 points higher than the multiples of defensive stocks such as Johnson & Johnson and Procter & Gamble.
And guess who’s growing faster over the next decade?
So, while tech may take a much-needed back seat for a few days or even weeks, its future is still bright.
And the next time a pandemic reaches our shores, make sure you skip the supermarket rush and buy generic paper towels on Amazon.
Perhaps pick up a few shares of Apple as well.
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