What The Biggest ETFs and Stocks of 2020 Say About This Crazy Year
2020 was a crazy year and that craziness manifested in its own way on markets.
Happy Monday, investors. Welcome to our third edition of Business As Usual, a digest covering happenings at the intersection of finance, culture, politics, and the things that fall in between.
I think I’m fair in concluding that 2020 was a whirlwind — the political, social, and economic fabric of the world was laid bare as the COVID-19 pandemic ravaged the global economy. Markets, which pared large gains as stay-at-home orders ravaged industrialized economies, began to rally as central banks printed trillions.
There’s a lot of crazy moments from this year: Hertz going bankrupt, Kodak’s glo-up from film company to generic drugmaker, oil going negative, Tesla’s S&P 500 inclusion, and plenty more. However, we wanted to go take a look at the biggest winners from this year in the spirit of our Robintrack roots. Here’s the ETFs, stocks, and other financial products which have had the strongest YTD returns (in 2020) — and a little bit of commentary.
Clean Energy Investors Seeing Green
Some of the stocks and ETFs that make the biggest runs this year were from the burgeoning clean energy space — which broadly includes solar, electric vehicles, hydrogen fuel, wind turbines, etc. Out of the top ten non-leveraged ETFs of this year, half of them were clean energy ETFs. Among them were the Invesco Solar ETF ($TAN) and Invesco WilderHill Clean Energy ETF ($PBW).
The ETFs were sent running by energy tech companies like Enphase Energy ($ENPH)—which ran over 460% this year— and solar panel makers like Sunrun ($RUN)—which ran up up over 342% this year. However, an outsized contributor to the success of these ETFs were EV companies. Tesla ($TSLA), which will be added to the S&P 500 by the open on Dec. 18, has run up 707% YTD. However, it’s no longer the only kid on the block anymore — Chinese-based automaker NIO ($NIO) splashed onto the scene this year and bested the gains in $TSLA by running up over 1,555%.
It’s unlikely that clean energy is going anywhere under a Joe Biden presidency. In fact, it’s likely to take a more pronounced role in the years ahead.
Genomics & Vaccine Companies Surge
If anybody had a good year, it was Cathie Wood. Wood, the chief investment officer and portfolio manager of ARK Invest, saw all five of its core active ETFs double. However, the biggest gainer was ARK’s Genomic Revolution ETF ($ARKG). The ETF’s 180% gains were made possible by increased investor interest in CRISPR gene editing, gene therapy, mRNA, and other novel treatments.
A basket of vaccine makers — some targeting the genomics revolution themselves — would have turned some equally impressive results. Members of the old guard like Pfizer ($PFE) and AstraZeneca ($AZNCF) pounced on the opportunity to produce a COVID-19 vaccine. However, many early-stage biotechs with few products and virtually no revenue turned the tables on investors, defying conventional metrics like fundamentals:
Moderna ($MRNA), which saw its vaccine approved in an EUA by the FDA on Dec. 18, has made leaps and bounds to bring its novel mRNA vaccine to market. The stock has run up 629% this year.
Novavax ($NVAX), a “zombie biotech” that was considered to be at-risk of bankruptcy in November 2019. The company had dropped over 88% in 2019 after its RSV vaccine, ResVax, failed — only to recover all of it and more in a blistering 2,100% run. Their vaccine recently finished enrolling for its U.K. phase 3 trial.
In short: many small-cap biotechs took advantage of robust investor interest in genetics, healthcare, and government contracts. Whether they will use these new-found footholds to establish a presence in the market is untold.
E-commerce Wins the Race
If you’ve been following social distancing guidelines appropriately, odds are you haven’t done a lot of retail shopping lately. In fact, I’d wager you’ve probably had the vast majority of your purchases delivered right to your doorstep.
For all the ‘new age’ pure-play digital retailers, COVID-19 might be one of the single biggest Ws in recent memory:
Amazon ($AMZN) is a company that needs no introduction. For that reason, I’ll just tell you that it jumped 68% this year. That’s not bad for a large-cap that was already worth over $1 trillion. Oh, and the company’s P/E as of this writing is 93x — which is still a premium, but a far cry from when the company was boasting a 1000X PE ratio back in 2016.
Overstock.com ($OTSK), which has gained a reputation as kind of a “weird” company because of its former CEO’s obsession with Bitcoin, didn’t do too bad itself. The company went on an impressive 781% jog — mainly because investors thought the company was undervalued.
Purely digital niche retailers like Etsy ($ETSY), Chewy ($CHWY), and Stitch Fix ($SFIX) also found a lot of warmth in the spotlight. $ETSY was the best-performing stock in the S&P 500 this year with a monumental 322% run. All three companies are components of the Amplify Online Retail ETF ($IBUY), which was among the top ten non-leveraged ETFs of 2020. $IBUY ran up 123% this year.
. . . and for all the traditional, “old guard” companies, the power of e-commerce helped them stay afloat — further iterating the likelihood that omnichannel will find a more pronounced place in a post-pandemic world.
Gambling On Sports Betting
After the 2018 repeal of a prohibition on sports betting and an increasingly accepting political sphere for the industry, sports betting companies had all the ingredients to go on a big run this year. Despite cancellations of sports earlier in the COVID crisis, sports rebounded — and sports betting came back in full-force with it.
The Roundhill Sports Betting ETF ($BETZ), which we covered on Robintrack some months ago when it was new, has since ran over 39% this year — emboldened by growth in part by these companies:
Penn National Gaming ($PENN), which acquired a 36% stake in Barstool Sports, set the stage for betting companies to make ‘media moves.’ Acquiring an audience (code for: “buying relevance” or “buying branding”) has become a crucial part of marketing strategy, which made this $163m purchase timely. $PENN is rolling out a sportsbook under the Barstool name in the months ahead. It has ran up over 252% this year.
Sinclair Broadcast Group (a controversial broadcast player with a large network of TV stations) did the inverse of what $PENN did when it struck a deal with Bally’s Sportsbook. Both $SBGI and $BALY surged on the promise of integrating sports betting with Sinclair’s robust broadcast network.
A streaming platform looking to integrate sports betting into the fabric of its sports-centric online TV platform also saddled big gains. fuboTV ($FUBO), which IPOed in October, had one of the most pronounced runs of the year. $FUBO is up 275% since listing on Oct. 9.
DraftKings ($DKNG), which came to market in a SPAC merger, might end up being the biggest winner from this year of sports-related antics. The company ran up over 405% this year.
Of course, $BETZ isn’t the only sports betting ETF and $PENN/$DKNG aren’t the only sports betting companies. The lot of sports betting companies have surged — and it’s looking like a trend which might continue as more states (and customers) embrace the practice.
Crypto Is Cool (Again)
There was one asset class that had a better year than equities and commodities like gold — and it was cryptocurrency. The Bloomberg Galaxy Crypto Index—which broadly tracks large-cap cryptos like Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin, and EOS—ran up over 230% this year.
Though it has not yet returned to its highs seen in its prominent 2017 bull run, the robust recovery of the crypto market from its bottoms in March far outpace most funds or indexes. The recovery has also helped its most visible components dunk on non-believers:
I’ve joked before that if Jamie Dimon says not to buy it — you definitely should take a closer look. It seems they might be taking that sage advice themselves, now. Analysts from the formerly crypto-skeptical JPMorgan are predicting significant demand for Bitcoin, which has run over 220% itself this year.
Ethereum, which ran up over 370% this year, saw the launch of its Eth 2.0 beacon chain. The update represents a pivot away towards efficiency. The update, which will one day make the Ethereum blockchain validate transactions with coins rather than computer hardware like graphics cards, has already seen thousands of users commit funds. As of Dec. 20, there is over $1bn Ether staked in the launch contract.
Decentralized finance (DeFi) took off this year as lending, asset, exchanges, and other crypto-centric platforms found a more pronounced space in the crypto market. The amount of value locked in DeFi applications this year increased over 2320% — with the bulk of that money being locked up in applications like Maker, Wrapped Bitcoin, Compound, Aave, and Uniswap.
SPACs and IPOs Are On Fire
If you ask some, they’ll tell you that this was really the year of the SPAC. SPACs, otherwise known as ‘blank check companies’, have been floated as a novel way of bringing private companies to market. They skip the bureaucracy of an IPO, allow normal investors to get in on the price action, and offer meaningful up-front capital to companies. That doesn’t mean the markets are throwing an “IPOs are over party!” just yet, though. While SPACs have a certain allure and increased transparency to them, IPOs still appear to reign supreme as the most effective way to raise cash.
Regardless, it seems that regardless of how private companies decide to adjust their sails to go public, there has been a lot of froth in valuations. This year’s IPOs and SPACs alike have been many of the companies that have collected investor dollars and inspired monster gains:
159 IPOs have raised over $67bn in proceeds. The IPO Renaissance ETF, which broadly tracks an index of newly-IPOed companies up to two years after they go public, has more than doubled this year. It has been lifted by companies such as Moderna, Uber, and Zoom.
242 SPACs have raised over $81bn in proceeds. Renaissance Capital, which runs the IPO Renaissance ETF, notes that the average loss from SPACs since 2015 was -9.6%. This number has marginally increased since SPACs became more commonplace throughout the end of 2019 and bulk of 2020.
For those who have been watching—and trading—these markets amidst the mania of this year, these trends feel uniquely 2020. Despite all the crazy, there has been ample opportunity. One can hope that 2021 will have more redeeming factors about it.
I’ll be spending the rest of this year looking back at 2020, looking forward to 2021 on Twitter. Next Monday, we’ll have one more Business As Usual to close out the week before we formally phase into the new ‘weekly digest’ for BAU. Stay tuned!