2020 was a life-changing opportunity for investors that capitalized on the fear in the markets, by being greedy. 2021, on the other hand, was a bit different.
Rising inflation, supply-chain disruptions, and covid variants plagued the economic landscape. We also had declining consumer confidence, a shaky political landscape, and more deaths this year, from COVID-19, than in 2020.
Yet, amidst all the chaos, all three major US indices broke new highs. If you stayed in the stock market this year, you were rewarded with double-digit returns, almost as if nothing I said above was happening.
Not all stocks, though, shared the same fate. For every Nvidia (NASDAQ: NVDA), there was Penn National Gaming (NASDAQ: PENN). Some winners, and some losers.
Let’s review the winners of 2021 in the stock market and see what lessons we can learn for 2022, moving forward.
1. Retail Investors
2020 saw an influx of younger, and bolder, retail investors coming into the stock market. These investors were bored, hungry for riches, and flushed with fresh, government-issued, stimulus checks. What better way to double your money, quick, than with stocks?
These same retail investors defined 2021 with investments in SPACs, meme-stocks, EV companies, penny stocks and cryptocurrencies.
Let’s go over, the “squeeze.”
It all started when a group of “highly intelligent individuals,” thought it would be funny to gang up on an overly-shorted GameStop (NYSE: GME), and buy shares of the company, to the point, that they made an elite Wall Street hedge-funds lose billions.
Because GameStop, allegedly, had more shares shorted than the underlying shares in the business, it triggered a short-squeeze that resulted in the stock exploding over 1000% in a matter of days. By the end of the squeeze, GameStop short-sellers lost an estimated $19 billion in the process.
The craze from GameStop spilled over into the broader market, resulting in dozens of highly-shorted names, such as AMC Entertainment (NYSE: AMC), BlackBerry (NYSE: BB), Bed, Bath & Beyond (NYSE: BBBY), Express (NYSE: EXPR), Tilray (NASDAQ: TLRY), and Sundial Growers (NASDAQ: SNDL) all rising by hundreds of percent overnight.
This rapid price action brought some fear into the stock markets, as many older and wiser investors called the market a “mania,” and feared that the worst of 2000 was to come. Albeit, it never did.
GameStop’s stock is still up over 700% for the year and AMC is up over 1200%. Were you lucky to buy into GameStop before it went to the moon? Or did you buy the shares at $482.29? Be honest.
There was point where I thought that the price of Bitcoin would rise indefinitely, until Peter Schiff (famous gold-bug), would start smashing mainframes and data centers all across the country.
If you bought Bitcoin in 2020, right before the start of the new year, you would currently be sitting on gains of 75% (or more if you sold at $65,000).
Top crypto tokens such as Dogecoin, Solana, and Terra are up over 10,000% for 2021. You could’ve bought, practically, any token at the start of the year and made obscene returns. Think you’re too late to the party? It appears you might be early.
The cryptocurrency mania, that swept the nation at the start of the new year, is larger than ever, with the total crypto market valued close to $3 trillion. Amidst massive volatility, including multiple drops of 20%+, the crypto market as a whole, has stayed resilient, and is expected to grow heading into 2022.
New crypto related projects, such as, the infamous, Non-Fungible Tokens (NFTs), have been massive disruptors in recent months. From anywhere between $7 and $21 billion in total value, there is room for NFTs to continue growing, even if the scene appears a little bit “bubbly.”
With backing from celebrities, athletes, wealthy investors and even the world famous Chrystie’s organization, implies that they don’t seem to be going away anytime soon.
Just pray that the ETH gas fees don’t over exceed the price of the NFT itself.
3. Oil & Energy Stocks
Electric Vehicle (EV) stocks turned the market upside down in 2020, with pre-revenue start-ups such as Lucid Group (NASDAQ: LCID) and Nikola Motors (NASDAQ: NKLA) piggy-backing off the success of Tesla (NASDAQ: TSLA).
Stocks that even, remotely, mentioned the term “EV,” would practically double overnight.
The pinnacle of 2021 EV-hype may have come with the IPO of Rivian (NASDAQ: RIVN). While having interesting future prospects, and solid backing from Ford (NYSE: F) and Amazon (NASDAQ: AMZN), the company’s current valuation sits right above legacy automakers; General Motors (NYSE: GM) and even Ford itself.
“The valuations may be a tad high, but that’s ok. It’s the future. It’s not like oil is ever going to be big again. They have a terminal value of zero. Plus, they are endangering the environment and bringing about climate change. Why would anyone buy oil stocks, ever again?!”
-Luke, EV enthusiast, age 18.
From going negative in 2020, to almost $90 a barrel in 2021, WTI Crude rose up from the grave, and brought along with it oil stocks, looking to capitalize on the lack of reserves available for consumption.
It was a scarce reminder that, not only is oil still the dominant source of energy for most of the world, but we as a nation, are still years away from a world, in which, going “fully electric,” is a viable option.
If you became an oil bull near the end of 2020, you would’ve been rewarded in 2021.
You could’ve picked any name from the S&P’s energy sector and made some money. Heck, you could’ve just picked the recently removed Dow component, Exxon Mobil (NYSE: XOM) or the current Dow component Chevron (NYSE: CVX) to make some solid returns for the year.
Or, if you were a serious oil bull, you could’ve gotten some shares of ConocoPhillips (NYSE: COP), Marathon Oil Corporation (NYSE: MRO) or Diamondback Energy (NYSE: FANG), with the latter two more than doubling for the year.
I’m looking at you, Warren. Maybe you shouldn’t have sold shares again.
From Russia, With Love.
4. Re-Opening Stocks
Once the news broke that vaccines were developed, approved and ready for distribution, the stock market changed its tune. The broader market began to rally, as stocks that been losers in 2020, were making a comeback.
Novice investors probably neglected the likes of Martin Marietta Materials (NYSE: MLM) or AutoZone (NYSE: AZO), both whose stocks went up by 50% and 70%, respectively.
Most fell for more simple re-opening names such as Starbucks (NYSE: SBUX), Carnival Cruises (NYSE: CCL), or United Airlines (NYSE: UAL), which ended up being down, or flat, for the year due to the resurgence of the delta and omicron virus. (bad luck, Chuck).
Notable winners include:
- Moderna (NASDAQ: MRNA) – 140%
- Ford (NYSE: F) – 130%
- Nucor Corp. (NYSE: NUE) – 115%
- Extra Space Storage (NYSE: EXR) – 88%
- Old Dominion Freight Line (NYSE: ODFL) – 78%
- Tractor Supply Co (NYSE: TSCO) – 62%
- Live Nation Entertainment (NYSE: LYV) – 60%
Companies that could navigate around supply-chain issues, as well as, raise prices amidst growing inflation, were big winners.
Vaccine manufacturers, homebuilders, banks, and specialty retail store stocks made big gains throughout 2021, even amidst a declining consumer sentiment. These companies performed well and rewarded their shareholders with strong earnings growth and share repurchase programs.
5. FAANG & The Big Tech
And the end of the day, it was the blue-chip technology companies that carried the major indices to victory this year. Just when you thought the Nasdaq or the S&P would kneel over, and collapse, Big Tech came to the rescue.
Big Tech winners include: (performance as of 12/27/21)
- Fortinet (NASDAQ: FTNT) – 135%
- Nvidia (NASDAQ: NVDA) – 128%
- Intuit (NASDAQ: INTU) – 67%
- ASML Holdings (NASDAQ: ASML) – 65%
- Alphabet (NASDAQ: GOOG) – 60%
- Microsoft (NASDAQ: MSFT) – 50%
- Tesla (NASDAQ: TSLA) – 50%
- Apple (NASDAQ: AAPL) – 32%
Nvidia was the breakout star of the year, more than doubling on news that they would provide the infrastructure for the “Metaverse,” as well as high demand for GPUs. They would’ve remained the highest performer in the tech sector, if it weren’t for their recent pullback. Good thing there are still a few days left before New Years!
Fortinet was the second best performer in the S&P’s Technology Sector, also more than doubling on news that they are the only truly profitable cybersecurity company in the tech sector.
Google, a sleeping giant in 2020, rose among the rest in 2021 with continued growth in its advertising business and growing demand for its cloud infrastructure. Look for continued strength into 2022, as small and medium sized businesses look to take back market share from the big corporations with Google Ads. (how ironic).
Microsoft finally reached the $2 trillion mark (and even overtook Apple for a few weeks) with their growing cloud business, that now battles AWS for top share, as well as demand for their newly released Xbox Series X and Windows 11.
Notably, Amazon.com (NASDAQ: AMZN), underperformed the broader index due to decelerated earnings, and Facebook (NASDAQ: FB) dropped on the news that Mark Zuckerberg is changing the company’s name to Sweet Baby Rays (NASDAQ: BBQ).
At the end of the day, it was the companies that had strong growth, indestructible moats, and pricing power that won out the rest. FAANG (plus Microsoft) continued to show resilience throughout the pandemic, and always found new ways to grow and return more value to shareholders. Going into 2022, these may be the safest bets in the market.
But in reality, you could’ve bought pretty much anything (except telecom) and probably made a good profit.
But you couldn’t stop buying calls on AMC… Now look where you are.
Join us next time for the losers of 2021!
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