In my opinion, a vaccine probably won’t be a quick fix for the S&P/ASX 200 Index (ASX:XJO) or any share market across the world.

On the healthcare side of things it’s very promising that American biotechnology company Moderna has seen promising initial phase 1 data in its participants. My colleague James Mickleboro covered the news here.

But there are two reasons why I don’t think investors should get too excited yet. (I readily admit I’m not an expert on vaccines at all though.)

The first is that the vaccine itself is still going to take time to go through the R&D process even if this is the fix for the situation. It may not prove to be the dream fix for the situation people are hoping. The company is aiming to start a phase 3 trial in July, so we’re still months away from seeing if it can be successful for the population. There’s going to be a lot more economic damage between now and potential final approval.

The other problem is how long it will take to get to the global population. It takes a lot of time to ramp up production of vaccines to the point where millions of people can receive it. And Moderna is a for-profit business – how much will it charge per dose? Will it be prohibitively expensive for most countries to be able to afford to give it to their citizens?

How much is a vaccine worth to the share market?

International share markets jumped overnight in response to the news. The ASX is also expected to rise by more than 1% today. 

Hopefully the healthcare side of things will be sorted sooner rather than later. However, there’s several issues in economies that may not be fixed quickly. A global recession seems unavoidable at this stage, the damage may already have been done. It just depends on whether it’s a small recession or a large one.

More reading

• 2 millionaire-maker ASX internet growth shares
• ASX 200 expected to rocket higher on Moderna COVID-19 vaccine news
• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 climbs 1% in positive start to the week
• Why this overlooked ASX 200 stock just got upgraded by 3 leading brokers to “buy”

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post A vaccine (probably) won’t be a quick fix for the ASX 200 appeared first on Motley Fool Australia.

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The book Killing Fairfax is a great insight into the launch of online classifieds. The far reaching impact of the growth of online classifieds has been the decline in newspaper profitability, as well as the ultimate purchase of Fairfax Media Ltd by Nine Entertainment Co Holdings Ltd (ASX: NEC). As an interested bystander, this has been like watching a slow motion car crash. 

Today, 3 major S&P/ASX 200 Index (INDEXASX: XJO) companies dominate online classified sales. While there remain unlisted competitors, the market giants have a clear lead.

Equipment for sale

Carsales.Com Ltd (ASX: CAR) does exactly what it says – sells cars. This is an area that, by itself, supports a large percentage of classified-style sales. However, the company has also branched into motorbikes, trucks, farm machinery, construction machinery and a range of other areas. The Carsales.com share price remains about 13% down, year to date. At the time of writing it is trading at a price-to-earnings (P/E) ratio of ~25. This is approximately 1 point above the 10-year average.

The 10-year compound annual growth rates (CAGR) for sales, earnings per share, dividend and equity are all over 10%. As a growth company, the return on capital expended has been well above 20% for the past 5 years.

Housing sales

REA Group Ltd (ASX: REA) is the largest of the newspaper-killing online classifieds companies. With a market cap of just over $11 billion it is one of the flagship companies on the ASX 200 and our largest IT company. It is also approximately 10 times larger by market cap than its closest direct competitor Domain Holdings Australia Ltd (ASX: DHG).

Like Carsales.com, REA also benefits from word-of-mouth marketing, and it too has diversified into other online classified areas such as commercial properties. Unlike other classified companies, houses are considered an investment. As such, REA also draws revenues from media and data sources. 

Many real estate related shares were down this week, including REA, due largely to the Q3 results from the Commonwealth Bank of Australia (ASX: CBA). Commonwealth Bank forecast a reduction in housing prices of between 11% and a worst case of 30%. However, I do not think it will impact REA like the 2008 GFC did. The company is paid predominantly for listings, so I believe it is likely to see revenues remain the same or rise as developers look to offload inventory.

Jobs, jobs, jobs

Of all the online classifieds SEEK Limited (ASX: SEK) is likely to see sustained reduction in revenues from the economic downturn. Our present 6.2% unemployment is masked by the role being played by the JobSeeker payments. And while the Australian economy is well placed to rebound from the current crisis. The same cannot be said for the rest of the world. Trade tensions aside, the impact of COVID-19 on the US, Japan, the UK and many other trading partners is likely to manifest in employment figures. 

The Seek share price is down ~23% year to date. Nonetheless it is still trading at a P/E of 39.8. This is a growth expectation that may not reflect the short-term reality.

Foolish takeaway

Of all of the online classifieds companies I like Carsales.com best at present. Its broad diversification in similar sectors will help sustain revenues regardless of economic factors. People sell equipment in both good and bad economies – albeit for vastly different reasons.

The company has been well managed over the long term. It shows solid evidence of continued growth and is currently trading at a reasonable P/E for a definite growth opportunity.

More reading

• 4 ASX 200 shares exposed to a fall in house prices
• Forget term deposits and buy these top ASX dividend shares
• Will these ASX car dealers bounce back after COVID-19?
• Why all ASX investors should avoid this easy mistake in 2020
• The importance of diversifying your ASX portfolio and how you can do it

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited, Nine Entertainment Co. Holdings Limited, REA Group Limited, and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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