These 'return to normalcy' stocks have further to run on an effective vaccine, Jefferies says

Published Tue, Nov 10 20208:53 AM ESTUpdated Tue, Nov 10 202010:36 AM EST

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). The arrival of a potential Covid-19 vaccine could have "profound expectations" for stocks and sectors that could see significant upside for even small steps toward normal, Jefferies told clients in a note. The hopeful news Monday about the Pfizer-BioNTech vaccine candidate created a sharp rotation in the stock market, as investors poured money into the companies that would benefit from a return to normal. Jefferies said there are "stocks beyond the obvious" where Wall Street estimates do not account for even small improvements from a vaccine. "Though questions remain on availability, duration of protection, and true efficacy in a world without precautions, the move today on a return to normalcy highlights how dislocated expectations remain," Monday's note said. One sector that could benefit is off-price retailers like TJX and Burlington , which could see a rebound in in-person shopping and the consumer shift back to regular patterns. "The potential for a higher volatility in spending patterns would be a tailwind for off-price margins as the somewhat sudden arrival of a vaccine is likely to fuel abrupt changes in category spend (potentially a slowing in hot categories such as home, lounge, and active), creating dislocation for manufacturers who had ramped production in these areas, and resulting in favorable buying opportunities for off-price retailers," the note said. Jefferies has a buy rating on both stocks, with a $67 per share target for TJX and a $255 target for Burlington. They closed at $60.90 per share and $236.40 per share, respectively, on Monday. The note also said a vaccine could bring about a return to normal for private equity companies like Blackstone , for which Jefferies has a buy rating and $64 price target. "A vaccine would likely pull forward the ability to achieve regular way private equity exits sooner than the market is expecting with BX well positioned as of quarter end with $3.6B ($2.96/share) of embedded gains," the note said. Blackstone didn't see the strong bounce that many other financials did on Monday, with its shares rising less than 1%. Shares of the investment firm are flat for the year but well below pre-pandemic levels. The stock closed at $56.04 on Monday. Travel stocks saw some of the biggest jumps on Monday, but Jefferies said there is still upside for OneSpaWorld , which is highly levered to the cruise industry. "One Spa World operates Spas & Fitness Centers on cruise ships. 2021 estimates reflect depressed demand & utilization with an assumed return to sea in late-2H21. Widespread vaccine deployment would pull forward the time horizon to return to sea and would also allow ships to return to sea at/near full/higher capacity," the note said. Jefferies has a buy rating and a $10 per share target for the stock, compared with an $8.50 per share closing price on Monday.

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(This story is for CNBC Pro subscribers only).

The arrival of a potential Covid-19 vaccine could have "profound expectations" for stocks and sectors that could see significant upside for even small steps toward normal, Jefferies told clients in a note.

The hopeful news Monday about the Pfizer-BioNTech vaccine candidate created a sharp rotation in the stock market, as investors poured money into the companies that would benefit from a return to normal. Jefferies said there are "stocks beyond the obvious" where Wall Street estimates do not account for even small improvements from a vaccine.

"Though questions remain on availability, duration of protection, and true efficacy in a world without precautions, the move today on a return to normalcy highlights how dislocated expectations remain," Monday's note said.