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Capital 19 Catch-Up


Dow and S&P500 Close Out 2020 At All-Time Highs – Who Were The Winners and Losers of the Pandemic Year That Was?

Despite the S&P500 and the Dow suffering their fastest 30% pullback on record earlier in the year, both finished 2020 at all-time closing highs at the end of last week. The passing of the long-awaited stimulus bill, better than expected weekly jobless claims, the continuing vaccine rollout, and the hope of a healthier economy in 2021 gave traders reason to be confident in the last few sessions of the year.

Despite all of the drama, the S&P500 finished the year with a 16.3% gain, easily edging out the blue-chip Dow index which made 7.3%. The Nasdaq, fuelled by its technology stocks more suited to the stay-at-home economy that prevailed in 2020, had its best year since 2009, making an impressive 43.6% over the twelve months. It was an amazing effort considering the damage the stock markets took in February and March.

Even the Nasdaq, however, couldn’t top the Capital 19 stock recommendations for 2020 which managed to pull in gains of 48.27% for the year. Stocks such as Tesla (TSLA), Zoom (ZM), Paypal (PYPL), and Apple (AAPL) made us more than 100%, while Renewable Energy Group (REGI) made us 175.6% in only six months. Overall we recommended 45 stocks with 40 winners and only 5 losers. If you would like a full rundown on all of our predictions for 2020 you can read our yearly summary in the Stock Report section of today’s email.

There is no doubting it was a wild year. In reading all of the year-end summaries the word “unprecedented” was certainly the most recycled descriptive. If you’d been without the internet for the year and came back to look at the year-end results you’d be excused for thinking it was a solid year for stocks. But the final ending point belies the drama that the year held. Out of the 253 trading days for the S&P500, 110 of them were swings of more than 1%. Comparably, 2019 had just 38 such sessions. We had a 12% fall in March, followed by two 9% rallies quickly after, with plenty of 5% moves in either direction in between. It was a “hold onto your hats” type of market.

The technology stocks certainly led the way in 2020 with the sector making 42% for the year. Consumer discretionary stocks also benefitted from more people shopping online, making 32.1% for the year. Communication services were the third-best sector to hold, making 21.3% as working from home required faster and more reliable internet services. Materials were up 17.9%, Healthcare made 10.4%, while the Industrials and Consumer staples made 8.4% and 6.6% respectively. Utilities finished the year down 4.1%, the Financials 4.9% and Real Estate lost 6.3%. You definitely didn’t want to be holding energy stocks, or the fossil fuel stocks at least, with the Energy sector losing 37.5% for the year.

In terms of Asset classes, Silver and Gold were the winners. Silver made 47.4% despite suffering a 34.7% pullback at one stage, while Gold made 24.6%. Holding US Corporate Bonds would have made you 9.7% and US treasuries 3.6%. Commodities all up were down 6.6%, while US real estate lost 8.4%, and crude oil fell 21.5%. The ASX 200 finished 2020 down 103.5 points or 1.5%. The US dollar lost 6.8% for the year, while the Aussie dollar was the best performing currency, rising 9.7%. The Russian Ruble was the worst, falling 16.5%.

If we drill down into individual stocks it was Tesla that outperformed all others. It’s late December inclusion into the S&P500 saw it top the list of the benchmark index, rising an outrageous 743% for the year. E-commerce shopping site Etsy (ETSY) was in second place with a 302% gain, while Catch Up favourite Nvidia (NVDA) made 122%. Others to make more than 100% for the year included Paypal (PYPL) with a 117% gain, clothing and footwear retailer L Brands (LB) with a 105% gain, chemical manufacturing company Albemarle (ALB) with a 102% gain, and chipmaker Advanced Micro Devices (AMD) who made 100%.

Top of the Nasdaq was Tesla again, followed by drug maker Moderna (MRNA) with a 434% gain, and exercise retailer Peloton (PTON) who also rose by 434%. Zoom Video was next with a 396% gain, while Chinese internet retailer Pinduoduo (PDD) made 370%, Docusign (DOCU) 200%, software company Mercado Libre (MELI) 193%, and fellow software maker Okta (OKTA) making 120%. Apple won the Dow with an 81% gain, followed by Microsoft (MSFT) who made 41%, Nike (NKE) 40%, the newly added Salesforce (CRM) 37%, and Walt Disney (DIS) with 25%.

The worst-performing stocks for 2020 are a who’s who of the energy and travel sectors. Occidental Petroleum (OXY) tops the list with a loss of 58%. Cruise Liners Carnival Corp (CCL) and Norwegian (NCLH) are next with losses of 57% and 56% (although you’ll see in our stock section that we made nearly 40% from these two after bottom fishing for them in October). Next is oil field services company TechnipFMX (FTI) who fell by 56%, followed by United Airlines (UAL) with a 51% loss and Marathon Oil (MRO) falling 51%. Outside oil and travel, big bank Wells Fargo (WFC) had a shocker of a year, dropping 44%.

So where to from here for 2021? In the corresponding Catch Up last year I wrote that with the Fed reducing interest rates to all-time lows and the trade war with China mellowing we should hopefully have some clear air for 2020. Oh, how naive, considering what was to come just around the corner. I’m slightly loathed to make another prediction considering the year we have had and the ongoing issues we are still experiencing. But stuff it, I’ll give it a crack.

Firstly, the coronavirus case numbers are still out of control in the US and through a lot of Europe. However, there are now three separate vaccines that have been approved and vaccinations have begun in a handful of countries. It’s a logistical nightmare but we know that impact from the coronavirus on the economy will only be diminished in six months from now.

Secondly, the US will have a new government in just a few weeks. One that is more likely to provide stimulus to the economy, and pull back on a trade war with China, but may also implement higher corporate taxes. Now, a lot will hinge on the Georgia Senate runoffs that will be held tomorrow. If the Democrats win both seats they will hold the Senate and the House and stimulus will flow while the pandemic remains. Lose either seat and there will be more deadlocks for another four years. Luckily for us, the markets will like the sound of both – although there may be more initial volatility with a Democratic victory.

Thirdly, in 2020 the globe has experienced a recession not seen since the 1930s. And while stocks initially plummeted, they bounced back almost as hard. Surely there can’t be a bigger shock coming than what we have experienced over the last twelve months (cross fingers, knock on wood etc). What on earth could make stocks fall after last year? Earnings will play a large part in where the market travels but with economies opening up in the second half of the year these can only get better as the year progresses.

I predict that money will be flowing away from the stay at home stocks that performed so well this year and into stocks that were left behind. Travel related stocks like airlines, cruise lines, and hotels will come roaring back, as will the restaurant and hospitality sectors. Oil will also stage a comeback as travel increases and people start moving around again. The fast-food industry should also have a good year, as will the beverage industry. And I will expect the financials to have a better year with the big banks making strong gains by year-end.

Whatever happens, it’s certainly going to be “unprecedented”. Let’s hope for a more uneventful year than the one we have just had. I’m not sure my ticker is up for another 2020 repeat.

In the week ahead the highlight will be the Georgia runoffs, the result of which will help shape the year ahead. Earnings will be quiet until the big boys start kicking things off next week, however, we will see results from Bed Bath and Beyond (BBBY), Constellation Brands (STZ), and Walgreens Boots Alliance (WBA). Data wise we’ll have manufacturing PMI, car sales, and the trade deficit, all culminating in the nonfarm payroll and unemployment numbers on Friday.

Have a great week.

Disclaimer: Capital 19 Pty Ltd ABN 17 124 264 366 AFSL 441891 (‘Capital 19’) believes the information contained is reliable, however, no warranty is given as to its accuracy and persons relying on this information do so at their own risk. This communication is for general information only and was prepared for multiple distributions and does not take account of the specific investment objectives of individual recipients and it may not be appropriate in all circumstances. Persons relying on this information should do so considering their specific investment objectives and financial situations. Any person considering action based on this communication must seek individual advice relevant to their circumstances and investment objectives. Subject to any liability which cannot be excluded under the relevant laws. Any opinions or forecasts reflect the judgment and assumptions of Capital 19 and its representatives based on information at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future. The investment manager certifies that all the views expressed in this document accurately reflect their views about the companies and securities referred to in this document and that their remuneration is not directly or indirectly related to the views. Capital 19, its directors, representatives, employees or related parties may have an interest in any of the companies and securities in this document and may earn revenue from the sale or purchase of any financial product referred to in this document or any advice. Past performance is not a reliable indicator of future performance. Unauthorised use, copying, distribution, replication, posting, transmitting, publication, display, or reproduction in whole or in part of the information contained in this document is prohibited without obtaining prior written permission from Capital 19.