I remember my first stock. It was Moderna. I didn’t even know anything about the company, other than the fact that they were a vaccine manufacturer. This was still pretty early into the pandemic.
I remember reading an article that, then-President, Donald Trump was starting to fund pharmaceutical companies that could quickly develop a vaccine. I don’t remember if he mentioned their name at the time, but the stock nearly doubled in a few days.
I wanted in.
I bought the shares, and I sold them at $65. I thought that I had won.
The stock fell to $19 in March, I panicked and sold the shares, only to later buy them back at $25. The pressures of holding through the rollercoaster was too much for me to handle. I sold them in May after a correction.
But that was 2020. This was 2021. A whole new world of opportunities, to lose money, was in front of me. But this article isn’t about my losses. It’s about the losses in the broader market. So let’s award the biggest losers in the Stock Market 2021!
1. Retail Investors
First the first time in their lives, a younger generation of investors put their hard-earned money to work. Maybe, you are one of these investors.
You probably saw the stock market crash in 2020, downloaded Robinhood, and bought the dip on Tesla (NASDAQ: TSLA) or Nvidia (NASDAQ: NVDA). Maybe, you saw the hype of social media and bought some Dogecoin.
Maybe, you bought some shares in an index fund and made a solid return. You may, have even allocated some of your savings to an experienced broker, one who can navigate you through this complicated financial world.
Or maybe, you are a degenerate that learned the basics of options trading on Robinhood, only to lose 75% of your portfolio on one trade that you felt would, “make you rich.”
Say what you want about Melvin Capital, and short-sellers in general, nobody lost more money than reckless retail investors this year.
2. Chinese Tech Stocks
Arguably, the biggest losers in the stock market this year were Chinese tech stocks. It was a Chinese massacre (don’t Google this up).
In 2020, everything was so rosy for Chinese equities. Tencent (OTC: TCEHY) and Alibaba (NYSE: BABA) were both approaching trillion dollar valuations. They were becoming bigger than Facebook (NASDAQ: FB), Berkshire Hathaway (NYSE: BRK.A) and even Tesla at the time. Everybody wanted in.
Then it all went downhill.
Late in 2020, China’s President, Xi Jinping, launched regulatory crackdowns into Tencent and Alibaba’s monopolistic practices, forced Alibaba to shelve their Ant Group IPO (the largest IPO in the history of IPOs), further punished Alibaba and Tencent, and even made Alibaba founder, Jack Ma, disappear. (spoilers; he reappeared.)
At the time, these incidences seemed short-sighted. Legendary value investors, such as Monish Pabrai and Charlie Munger, both offered their vote of confidence towards President Xi, Alibaba, and the future growth prospects of capitalism under the CCP.
Notably, Alibaba was over 30% off their 52-week high. It was a must-buy.
Then, Beijing proposed to turn online-tutoring firms into non-profits…
The three largest Chinese tutoring companies, TAL Education (NYSE: TAL), New Oriental Education (NYSE: EDU) and Gaotu Techedu (NYSE: GOTU), combined, lost over $130 billion in value. Shame.
The final straw was China’s intention to delist the newly IPO’d Chinese ride-sharing company DiDi (NYSE: DIDI) from US exchanges.
The fear that China could delisted ADRs at any moment has shaken the faith of US Investors, with many pulling capital from companies big names such as Alibaba, Baidu (NASDAQ: BIDU) and JD.com (NASDAQ: JD).
Even the Hang Seng Index, which tracks the largest companies in Hong Kong, is currently 15% off its highs from last year, while the KraneShares CSI China Internet ETF (NYSE: KWEB) is down 50%.
2022 could see a reversal for the some of these names as overwhelming fear subsides, but nonetheless, watch for more news to come out from Chinese regulators.
Special Purpose Acquisition Companies (SPAC) were one of the foundational talking points of 2020. Every SPAC was being bought by retail investors, whether or not, the company in question was worth the purchase.
These “blank check” companies used investor capital to buy out, supposed, “unicorns” and bring them to the public market, all while avoiding the regulatory (and expensive) process of the IPO.
Some of the SPACs turned out to be a massive success. Take Lucid Group (NASDAQ: LCID). The company completed an $11.75 billion merger with Churchill Capital Corp IV in February, and is now valued at over $60 billion.
Another example is SoFi Technologies (NASDAQ: SOFI), taken public by infamous investor Chamath Palihapitiya. With an initial value of $2.5 billion, the company went as high as $18 billion in November, before recently settling down at $12 billion. The company has exciting future prospects, even if Chamath sold 15% of his stake, less than a year after the deal.
Other than a few notable exceptions, such as DraftKings (NASDAQ: DKNG), the overall SPAC market has been a complete disaster in 2021.
As of Q4 2021, the SPAC hype has died out (thank god) but the value of going public through them, has not. Investors have used them as pump and dumps throughout 2020, taking any credibility from them for the foreseeable future. Nonetheless, expect more SPACs to hit the public market over the next decade (hopefully with good underlying businesses).
4. Bill Hwang
I’ll be honest, a part of me was starting to justify the rising valuation of ViacomCBS (NYSE: VIAC), prior to its 60% drop in March of 2021.
With the announcement of their Paramount+ streaming service, I figured that maybe, the market was assigning a 25x P/E multiple to the business, similar to what the market was assigning to other streaming companies.
Then I looked into what Paramount+ actually offered. I immediately realized that they wouldn’t be able to compete with the catalogs of Netflix, Amazon Prime or even Disney+. The 25+ P/E multiple was outrageous so I decided to short the stock, once it’s price hit $100. Best decision of the year, personally.
While I made over a 60% return, Bill Hwang lost $20 billion dollars. Crazy world we live in.
Long story short; The former Tiger Management analyst and insider trader, Bill Hwang, operated a family office by the name of Archegos Capital. Good old Bill faced a margin call after overleveraging his long positions in ViacomCBS, Discovery (NYSE: DISC.A), Baidu, Tencent and Vipshop (NYSE: VIPS) using derivatives called “total default swaps.”
Once ViacomCBS revealed a $3 billion stock offering, it was all over. The stock fell over 10%, triggering a domino effect, in where dozens of banks holding these shares, on behalf of Mr. Bill, ran to the exits. Bill Hwang lost billions. Nomura and Credit Suisse lost billions. It was a sh*tshow.
To call Bill Hwang, the loser of 2021, would be rather an underwhelming statement.
5. Cathie Wood, Robinhood & Growth Stocks
It’s hard to know, where it all began.
Maybe it was Robinhood, the application that “democratized” finance. Millions of young, and bored, gamblers signed up on the brokerage, and began trading stocks and options like the pros.
Maybe it was the incredible rise of Tesla, with both institutional and retail investors, pushing the, roughly, $80 billion company to nearly a $1 trillion valuation within a year. ARK funds had nearly half a trillion dollars in inflows, and Cathie Woods was called the next “Warren Buffet.”
Companies that earned no profits, and barely made a couple of billion in revenue, were given valuations of $50+ billion. If a company did something new and exciting, its stock was going into the ARK Funds, and it’s value was sure to rise.
Back then, you couldn’t see it, but it was bound to happen.
Cathie’s innovative investing style, captivated the hearts and minds of many young, and impressionable, “investors.” But at their peak valuations, her portfolio became unsustainable.
At its peak, Roku (NASDAQ: ROKU) was trading at 32x TTM Sales. Sales, not earnings. The company didn’t generate earnings.
Teladoc (NASDAQ: TDOC), another Cathie favorite, was trading at 40x TTM sales. Zoom? Zoom Video Communications (NASDAQ: ZM) was trading 115x TTM sales.
Like I said, unsustainable.
In a low rate environment, those valuations could be forgiven, but with the market pricing in the coming Fed rate hikes, it was only a matter of time before her house of cards was sure to fall.
A lot of us (new investors) were losers this year. But, just like gambling in a casino, there’s always another hand to play.
Unless you’re Bill Hwang… shame