The Major Indices Just Had Their Best Quarter This Millenium – Which Stocks Should We Have Had In Our Portfolios?

Wall Street’s second-quarter was nothing short of a rip-snorter in 2020, setting records not seen since the last millennium. Sure it was bouncing back from one hell of a battering in Q1, but the pace and strength of the comeback we have seen over the last few months could well be a once in a lifetime performance. 

There were numerous reasons for the rally that stemmed from devastating losses caused by economic shutdowns due to the coronavirus. By mid-April cases of Covid-19 initially flattened and then dipped slightly giving many hope that the worst was over. The Government had tipped in billions of dollars in bailout money, with the promise of more to come. While at the same time the Federal Reserve took interest rates down to 0% and promised to pump money into ETF and Treasury bonds. Rumours of potential vaccines popping up here and there, regardless of whether they were based in fact or not, certainly didn’t hurt sentiment either. 

The Nasdaq was undoubtedly the star over the last three months, as it has been throughout the whole of 2020. While the tech-heavy index was the best performer in Q1, losing only 14.2%, it gained all of that back and more in Q2 jumping 30.6%, and leaving it up 12% for the year to date.  

The winning stock out of the Nasdaq 100, without a shadow of a doubt, has been electric car maker Tesla (TSLA). It is up a whopping 106.1% in the last three months alone while gaining 158.1% in the first half of the year. Sales growth in overseas markets such as China have offset small losses in the US, and it has far outperformed it’s larger competitors in the space who have struggled to move product throughout the shutdown. 

Latin American based online commerce platform MercadoLibre (MELI) has also been a standout for the ‘Daq. It also more than doubled its value in the second quarter, rising 101.8%, and is now up 72.4% for the year to date. e-commerce competitors such as PayPal (PYPL) and eBay (EBAY) were also high up on the honours list with gains of 82% and 74.5% respectively. With other notable gains coming from DocuSign (DOCU) up 86.4%, Zoom Video (ZM) up 73.5%, and Lululemon (LULU) up 64.6%. 

Over on the S&P500, the benchmark index was up 20% for the quarter which was its best result since 1998. It was coming off of its worst quarter since Q4 2008 but is now down only 4% year to date. Of the 11 sectors covering the S&P500, the consumer discretionary stocks were up 32.6% on average with Information Technolgy a close second with a 30.1% gain. Energy stocks filled out third place, gaining 28.7% as the oil price staged a mini recovery over the quarter. 

The leading S&P500 stock was oil and gas player Apache Corp (APA). It was up an incredible 223% in the second quarter, which becomes less incredible when you realise it is still down 47% year to date. Oil and gas services company Haliburton (HAL) has a similar story. It was the second-biggest gainer on the benchmark index adding 89.5%, but is still down 47% for the year. Same with Marathon Oil (MRO) in third place, it was up 86% in the quarter and is still down 54.9% YTD. eBay and Gap (GPS) rounded out the top five. The clothing retailer also had a dead cat bounce, rising 79.3% in the quarter but still down 28.6% for the year. 

Over on the Dow, the large caps are doing it hardest so far in 2020. The headline index was coming off of its worst start to a year in history, and despite having its best quarter since 1998, and gaining 17.8% it is still down 9.6% for the year so far. Of course, it is choc-full of the older more established companies with little of the sexy .com names that inhabit the Nasdaq and other places. These are the stocks you can rely on over the long term rather than the crash and burn types you get elsewhere. 

Nevertheless, Capital 19’s oldest favourite Apple (AAPL) ruled the roost. It gained 43.5% for the quarter and is now up 24.2% in 2020 and hitting new records on an almost daily basis. Dow Inc (DOW) has nothing to do with the Dow itself. It is a materials science company which spun out of Du Pont in April of last year, taking its place on the Dow Index, and of which was its second-best performer for the quarter gaining 39.4%. It is still down 25.5% YTD. 

Dow stocks that also made more than 20% for the quarter included Home Depot (HD) 34.2%, Microsoft (MSFT) 29%, Goldman Sachs (GS) 27.8%, Chevron (CVX) 23.1%, and Boeing (BA) 22.9%. Only pharmacy retailer Walgreens Boots Alliance (WBA) failed to make gains, falling 7.3%. And only six of the Dow’s thirty components are positive for 2020 to date.

So so far in 2020 we’ve seen one of the worst quarters in decades, quickly followed by one of the best. Coronavirus cases are ramping up again but the rush to close down economies is not as swift this time around. There is a concerted effort from the WhiteHouse to ignore the virus and just keep ploughing on for the sake of the economy. There are covid19 treatments that have been shown to lessen the effects of the virus, but will that be enough to stem the tide of deaths? And will it matter to the economy if it does or not?

Will the stock market continue to break new ground, or will the stocks we hold in our “pandemic portfolio” – https://capital19.com/investing-in-us-stocks/the-pandemic-portfolio-update-3/ – take off again over the next quarter as the pandemic takes hold? Watch this space.

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