By way of an example, take the fluctuating fortunes of Moderna – now a household name. Its technology platform has been validated by Covid and it is much more than the one-trick pony that the market perceives.
It currently has 44 development programmes spanning respiratory, cancer, HIV and rare diseases in progress.
This offers an extensive vision of hyper-personalised vaccines. Yet the shares are back where they were at the start of 2021, they have de-rated to less than 1/10th of the company’s pre-Covid revenue multiples – in other words, Moderna is more than 10 times cheaper in price-to-sales terms today than it was before the approval and outperformance of its Covid vaccine, and before the substantial financial de-risking that came from Covid cash flows. The de-rating is even more dramatic when adjusted for the enormous cash balance.
Today, this is a company with $17.6bn (£13.5bn) on its balance sheet, which earned $18.5bn in revenues at 66 per cent net margin last year.
How does this make sense? Volatility can make fools of us all.
Having begun with the 'Sage of Omaha', let’s also finish with more of his wisdom: “The stock market is a device for transferring money from the impatient to the patient.”
James Budden is head of distribution and marketing at Baillie Gifford
