Covid-19 has no doubt made the exercise of valuation an ever more so difficult task – Investors have had to grapple with how long and how Covid-19 has impacted earnings during the pandemic and what will earnings look like in a post-Covid-19 world – with a purpose to financial modelling, to ascertain the intrinsic value of investments. One crucial aspect to valuation is time. Understanding time to reaching global immunity, so we can more accurately plug assumptions on time, in our financial models has been crucial. According to recent data from Bloomberg’s Covid-19 Tracker, which gathers extensive data from countries, provinces and their official representatives – the biggest vaccination campaign in history is underway with more than 1.57 billion doses already administered across 176 countries. The latest rate was ~26.8 million doses a day according to Bloomberg. If we consider U.S top infectious-disease official, Dr. Anthony Fauci, who has argued that vaccinating 70% to 85% of the U.S. population would enable a return to normalcy and apply this on a global scale, at the current pace of 26.8 million a day, it will take another year to achieve global immunity. Importantly, the rate, is steadily improving. In Australia, the latest vaccination rate is 68,137 doses per day, on average. At this pace, it will take another 17 months to cover 75% of the population. Whilst it is beginning to appear that we can more accurately financially model and value equities for the end of Covid-19 (assuming current assumptions hold), the question remains as to how Covid-19 has structurally shaped Company earnings going forward. Indeed, this then, is an exercise, our investment managers are continuously rigorously pursuing, in undertaking fundamental analysis and meetings with Company executives, regardless of the pandemic.
Equity-Strategy-24-May-2021