Retail Traders Buy Into Merck’s Pill, Bail on Vaccine Shots

(Bloomberg) -- The day-trading crowd is embracing drug heavyweight Merck & Co.’s oral antiviral treatment, and moving on from Covid vaccine stocks, as investors weigh the outlook for treatments to combat and prevent the coronavirus.

Individuals have bought $288 million worth of Kenilworth, New Jersey-based Merck, pushing shares to touch an eight-month high, according to data from Vanda Research. Some retail traders have funded those purchases by selling vaccine stocks including Moderna Inc., BioNTech SE and Pfizer Inc., said the firm that tracks retail-trading flows in the U.S. 

Vaccine stocks have been hammered by retail and institutional investors alike since Merck said on Friday that a study showed its pill slashed the risk of getting seriously ill or dying from Covid. A group of vaccinemakers has shed $33.5 billion combined in the past three sessions. Biotechnology stocks broadly have also been caught up in the recent risk-off trade that has wiped billions in value from technology stocks and the market as a whole.

“Considering the performance gap between vaccine companies and Merck, we expect them to continue chasing this emerging trend,” Vanda’s Ben Onatibia and Giacomo Pierantoni said. At the same time, there is an “overwhelming presence of vaccine manufacturers and value/reopening trades” among stocks individuals are selling.

More broadly, retail investors are taking advantage of weakness in broad markets, despite recent volatility. They snapped up an average of $1.2 billion in assets per day this week, more than the average this year, with a preference to buy stocks in larger quantities when markets fall more than 1%, Vanda data show.

U.S. futures slumped on Wednesday morning, with the S&P 500 and Nasdaq both falling more than 1%. The S&P 500 has dropped 4.2% in the past month, while the tech-heavy Nasdaq has shed 6.3%.

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