Summary
- In the last 10 months, the share price had 19 pullbacks of more than 10%. All 19 times people were in fear, uncertainty and doubt, yet the stock strongly rebounded.
- Buying extra Novavax shares on those pullbacks and gradually selling small chunks after the price goes higher has had excellent results.
- The main current fear is its manufacturing is very off track. I describe 7 reasons why it is on track, and will soon be producing ~200 million doses per month.
- Novavax and its partners have 2.07 billion doses of orders, most of which are advance purchase agreements that are very hard to cancel, and give Novavax strong profit margins.
- Just its 2022 Covid earnings plus its strong non-Covid pipeline justify a higher valuation. Also when including post-2022 Covid earnings, the valuation should be far higher.
In the last two weeks, the share price of Novavax (NASDAQ:NVAX) has pulled back by 39% (from $236.5 on December 20 to ~$145 now) on irrational fears that their production is off track and that Omicron will mean little to no Covid revenues for Novavax this year or in the future. Even before that, the stock was greatly undervalued, as I described here and here. So I think now is a great buying opportunity. Below I will describe numerous reasons why I think these fears are overblown. But first let’s take a look at what occurred the last 19 times that fears caused a significant pullback in the stock, so we can learn from it and use it to benefit from the latest pullback.
Buying extra on the overdone drops and selling on the consistent rebounds has had excellent results
I have suggested many times to buy extra shares on pullbacks when the price is low, and gradually take profits on them on the rebounds … without touching your core long-term position. As this chart of the past 10 months shows, 19 times between March 1st and December 20th, the price dropped by more than $20 (and by more than 10%) over the course of one day to two weeks, and 100% of the time those 19 drops were followed by major rebounds.
