COVID-19 Resurgence, Be Cautious with Related Stock Investments... "Don't Forget Past Lessons" [AK Radio]

Patients Rising Again... Theme Stocks on the Rise
Clinical Failures and Risks Warn... Cautious Investment Needed

As COVID-19 resurges recently, stocks related to the pandemic that drew attention during the first global outbreak are once again attracting investors' interest. In the early stages of the pandemic, stocks related to vaccine and treatment development, as well as diagnostic kit manufacturing, surged significantly in the stock market, delivering substantial profits to investors. However, many pharmaceutical companies eventually failed clinical trials or delivered results below expectations, causing their stock prices to plummet and resulting in losses for many investors. Experts point out that a cautious approach is also necessary when investing in pandemic-related stocks amid the current COVID-19 resurgence.

Experience from the First Pandemic

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When COVID-19 first emerged, global expectations for vaccine and treatment development soared, causing the stock prices of related pharmaceutical companies to skyrocket. At that time, companies developing vaccines and treatments received continuous attention, and their stock prices increased severalfold. The stock market experienced a kind of 'COVID theme stock' craze, with many investors rushing to purchase related stocks.

However, as time passed, delays in vaccine development and increasing failures in clinical trials caused stock prices to return to their original levels or fall even more sharply. Especially for companies that failed during clinical trial stages, the decline in stock prices was significant, leading many individual investors to suffer substantial losses. This experience highlighted the importance of distinguishing between beneficiary stocks and theme stocks in the stock market.

Difference Between Beneficiary Stocks and Theme Stocks

Beneficiary stocks refer to stocks whose prices rise due to direct improvements in a company's performance caused by specific events or situations. For example, a company that successfully develops and sells a vaccine can be considered a direct beneficiary of COVID-19. Beneficiary stocks are backed by tangible business performance, allowing investors to expect stable returns from a long-term perspective.

On the other hand, theme stocks are those whose prices temporarily rise due to specific issues regardless of actual performance. Theme stocks attract market attention based on particular topics or issues and may experience significant short-term price increases, but if not supported by real performance, they carry a high risk of sharp price declines. During the early COVID-19 period, many pharmaceutical companies announced vaccine development plans, causing stock prices to surge, but many ended up as theme stocks without delivering substantial results.

Experts emphasize that distinguishing between beneficiary stocks and theme stocks is crucial in investing. While theme stocks can experience rapid short-term price increases, they pose a significant risk of sharp declines if not supported by real performance. Investors should not rely solely on market expectations but make investment decisions based on the company's actual business performance.

Considerations When Investing in Pharmaceutical Stocks

Investing in pharmaceutical stocks is known to be challenging for general investors. The terminology and business content used by pharmaceutical companies are complex and not easy to understand. Especially stocks related to diseases like COVID-19 reflect even more complicated situations, requiring investors to approach with greater caution.

The vaccine and treatment development process is broadly divided into the discovery phase and the development phase. In the discovery phase, new drug candidate substances capable of treating the disease are identified, followed by animal testing based on these candidates. It is crucial to verify whether the new drug candidates are actually effective during this phase. After a successful discovery phase, the process moves on to the development phase.

The development phase involves clinical trials applying the discovered new drug candidates to humans. Clinical trials are divided into phases 1, 2, and 3, each verifying the safety and efficacy of the new drug. Phase 1 confirms the safety of the drug candidate in humans, phase 2 determines the drug's efficacy and appropriate dosage, and phase 3 conducts large-scale trials to finally verify the drug's safety and effectiveness.

Experts advise, "Information released during clinical trial stages is very important for investors," but also caution, "accurately interpreting and understanding this information is not easy, so investors should approach carefully." It is crucial for general investors not to simply accept clinical trial results or disclosure materials but to understand and analyze them precisely.

Current Situation of COVID-19 Related Stock Investment

[Image source=Yonhap News]

Due to the resurgence of COVID-19, the stock prices of some pharmaceutical companies are rising again. As in the past pandemic, companies announcing vaccine and treatment development are receiving attention. However, experts warn that similar situations to the past may occur again. In particular, many companies with rapidly rising stock prices have seen increases driven by market expectations without substantial achievements.

Among the companies whose stock prices are rising due to the current COVID-19 resurgence, many are the same pharmaceutical companies from the previous pandemic. These companies have announced plans for vaccine or treatment development again, causing stock prices to rise, but whether these plans will yield actual results remains uncertain. Reflecting on past experiences, investors should be especially cautious as companies that experienced temporary price increases but failed to deliver real results are at high risk of sharp price drops.

Why Investors Need a Cautious Approach

Experts warn that while investments in COVID-19 related stocks amid the current resurgence may show rapid growth similar to the past pandemic, they also carry significant risks. Considering that many stocks with rising prices have done so solely based on market expectations without real achievements, investors need to approach such situations very cautiously.

Instead of getting swept up in short-term price increases, investors should thoroughly analyze a company's actual business performance from a long-term perspective. Pharmaceutical companies generally invest significant time and costs in new drug development, and the timing of results is uncertain, so investment strategies must account for this uncertainty. Investors should fully understand the materials and disclosures released by companies and make careful investment decisions based on them.

Especially for pharmaceutical companies with rapidly rising stock prices, it is necessary to closely analyze the clinical trial results or technical achievements behind the rise. Choosing stocks supported by real achievements and business performance, rather than price increases driven merely by market expectations, is the way to secure stable long-term returns.

Conclusion: Thorough Analysis and Cautious Approach Are Essential

Investing in COVID-19 related stocks amid the resurgence requires a cautious approach that does not forget past lessons. It is essential to clearly distinguish between beneficiary stocks and theme stocks and thoroughly analyze the company's actual performance. Particularly, due to the complexity of pharmaceutical stocks, sufficient information and knowledge are indispensable.

Investors should fully understand the materials and disclosures released by companies and make careful investment decisions based on them. Experts emphasize, "While there may be high expectations that past successes can be repeated, it is important to analyze the market and the company's actual situation closely and make investment decisions accordingly."

Although COVID-19 related stocks are gaining attention again due to the resurgence, this also serves as an opportunity to recall past lessons. Investors must make wise investment decisions through thorough analysis and a cautious approach.

Editor's Note This content is also available on Asia Economy's economic podcast 'AK Radio.' AK Radio is a platform that provides investors with essential information on politics, economy, international affairs, tech, bio, and digital trends. Clicking the video play button within the article allows you to hear the reporter's actual voice. This article is a reorganization of the content broadcast on AK Radio through ChatGPT.