2020 was definitely a decisive year for all of us in almost all areas of life. Asset classes of all kinds were also affected by these special circumstances this year, dividing the business world into clear winners and losers.
After the first few months of the year looked promising on the financial markets and some even reached new all-time highs, one of the biggest global financial and economic crises in history followed. The entire world economy was brought to a standstill in the wake of the Corona Pandemic, which led to panic on the financial markets and revealed the weaknesses of globalization. In addition, a large number of exciting IPOs were to take place this year. However, the majority had to be either postponed or cancelled, resulting in only about 20% of the planned IPOs taking place, making 2020 one of the worst years in terms of completed IPOs. Although an end to the current crisis is not immediately in sight, the positive news regarding a vaccine gives investors hope and boosted share prices especially in the last months of the year.
In 2020, however, there were not only losers, but individual sectors were also able to post significant gains. The year clearly divides the business world into winners and losers, which made theme investments very popular with investors this year and showed great potential. You can find out which sectors were the big winners and losers in 2020 here.
What do Microsoft, Amazon, Nvidia, Hello Fresh, Activision Blizzard, Zoom, Netflix and Delivery Hero have in common? Right, they all have at least one vowel in their names. But not only that! All of these companies are benefiting enormously from the increasing spread of home office and the general "stay-at-home" measures this year. The companies from the technology sector are definitely the big winners this year. Microsoft, Zoom, Slack and also many Cloud Computing providers were able to benefit greatly from the fact that more and more companies have enabled their employees to work from home and, above all, have made communication more digital. Incidentally, our quota of the year was also marked by the fact that "You're on mute".
Due to the severely limited opportunities for leisure activities, the gaming industry experienced a real boom this year, along with Netflix. Especially Nvidia as one of the largest developers of GPUs and chipsets showed an extraordinary share price development this year and more than doubled its share price.
The delivery services Hello Fresh and Delivery Hero also doubled their market values. Food and many other items were in greater demand online this year than ever before. The total online trade increased many times over, enabling Amazon in particular to continue its strong growth and further increase its market power. PayPal was also able to benefit from the increase in online trade and the entire increasing conversion to mobile payments, increasing its share price from under €100 per share to around €180 at the end of the year. Our analysts expect the trend to continue and overwhelmingly recommend buying the security.
The Nasdaq is the main driver of the overall upswing among tech companies. Like hardly any other index, the Nasdaq recovered from a temporary slump in March and is now close to its record high.
2. Healthcare and pharmaceutical industry
We all hope that the spread of the corona virus will soon come to an end. This year, all eyes were on BioNtech, Pfizer & Co. in the hope of an early vaccine. Over the last two decades, the pharmaceutical industry has already been able to increase its turnover enormously worldwide. This is mainly due to the many new achievements in biotechnology through the growing understanding of various diseases and applications in genomics research. Companies from the pharmaceutical industry are often integrated into the portfolio as a stability factor, since demand is considered secure even in times of economic downturn and costs are usually covered by insurance companies. A closer look at current developments in the pharmaceutical industry can be found here in another blog article.
3. Utility companies
Utilities were also able to benefit from the "stay-at-home" trend this year. In the past, utilities were considered to be crisis-proof investments with rather few fluctuations and moderate, secure profits. Due to the energy turnaround initiated a few years ago and the associated exit from nuclear power, European utility stocks were initially weakened considerably. In recent years, however, those companies that have successfully adapted their business activities and increased their share of renewable energy sources have returned to a positive trend and have caused euphoria among investors. Many investors sense their chances regarding sustainable energy. This has been successfully implemented, for example, by the Italian energy company Enel or the German utility RWE, which showed impressive returns in 2020. ETF investors were able to achieve pleasing returns with the iShares Global Clean Energy, with the price almost doubling. The focus on a low-emission policy will certainly continue after the Covid 19 crisis, so that corresponding ETFs are still considered promising.
It is not only the stock markets that are heading towards the end of a turbulent year, raw material prices were also severely affected by this year's crisis. As is well known, gold is always considered a classic safe haven in times of economic weakness. Accordingly, the price of gold has risen from under $1,500 to over $2,000 per troy ounce in the wake of the Covid 19 crisis and was thus almost 40% in an upward trend. Towards the end of the year, the price started to decline again, due to the hope for a vaccine and the associated possible end of the corona crisis.
5. Crypto Currencies
Crypto-currencies are already for several years on the advance. This year gave the uncertainties on the markets Bitcoin & CO. additional tail wind, so that at the beginning of December even a new record high was set up. It also became apparent that the digital currencies were not only able to profit from the effects of the virus, but that institutional investors increasingly sensed their opportunities and invested in the sector. Not only did Bitcoin break even on a large scale, but its "little sister" Ethereum also managed to increase its share price by over 300% during the year.
1. Aviation and tourism
However, the year 2020 has obviously produced not only the big winners but also clear losers. The aviation and tourism industries are clearly placed in this category. Due to worldwide travel restrictions, a large number of aircraft remained on the ground. In the summer, hopes were initially raised that more travel would be made possible again. However, the glimmer of hope quickly evaporated and the upward trend faded. Lufthansa, which had previously been able to achieve impressive profits and had a place as a safe bank in many depots, will end the year with a sobering fall in share prices of around 40%. It is also questionable for the future how the corresponding securities will develop. Travel warnings continue to exist and business trips could decline significantly in the long term. But not only the airlines are suffering from the circumstances, tour operators like TUI are also facing huge challenges. All companies in the industry, including hotel chains, are currently struggling to cut costs and thus save their businesses. In the future, the decisive factor for these companies will be how the incidence of infection develops and when a vaccine can be used on a massive scale. Only then will it become clear whether transatlantic travel can return to pre-corona levels and whether business travel will resume. The performance of this year's largest European tourism ETF is presented below. It should be noted, however, that there is no ETF on the market that only includes companies from the travel industry. Although the selected ETF also covers airlines such as Ryanair and Lufthansa, the largest position at present is Flutter Entertainment, which is active in gambling and has significantly improved the performance of the ETF.
2. Automotive industry
Around 2 million jobs in Germany are directly or indirectly linked to the automotive industry. After many of the manufacturers had already been struggling with problems before, the situation has worsened dramatically again this year. In the first half of the year, sales in Europe fell by over 40%. Since then, circumstances have improved somewhat, but still, this year, probably about a quarter less vehicles will be sold in Germany than in 2019. The government is doing its utmost to help the companies and has already promised billions of dollars in support to the weakening industry. Among other things, the purchase premium for electric and hybrid cars has been doubled and a two billion fund has been set up for the supplier industry. At the same time, the government is pursuing the goal of having a charging station at every fourth filling station by the end of 2022. Four more years later, this figure is to rise to three quarters. However, one company in particular stands out clearly in this weakening industry: Tesla. Elon Musk's company performed so well that Tesla is included in the important S&P 500 index and reached a new all-time high. The Chinese electric car manufacturer Nio showed a similarly strong performance, so the potential in this sector is enormous. However, who will ultimately prevail in this field remains exciting and will be seen in the coming years.
3. Oil Industry
The oil industry is possibly going through the worst year the industry has ever experienced. The demand for oil collapsed dramatically at the beginning of the Corona crisis, the price of crude oil fell massively and the oversupply of fossil fuels was already problematic before. This led to a veritable wave of bankruptcies among oil and gas companies. Many investors seem to be saying goodbye to the oil industry in the long term and prefer to turn to renewable energies, from which they hope for lower risk and higher risks in the long term. Since more than half of the world's oil demand is attributable to road traffic, the electrification of mobility poses an existential threat to the industry. In addition, the expansion of the home office is putting pressure on oil companies, as commuting is decreasing and the demand for oil is growing accordingly.
The structural pressure on the oil industry will continue regardless of the pandemic in order not to further endanger the goals of the Paris Climate Agreement. These goals are not compatible with support for the oil industry, but require the expansion of renewable energies and a reduction in fossil fuels.
Many banks were already in a difficult situation before the pandemic due to structural weaknesses and chronic inefficiency. Now, with the threat of massive loan defaults in the near future, many banks are in a precarious situation that probably not all will survive. Although it is still completely unclear how much and when the banks will suffer damage, it is clear that it will happen. Due to the suspension of the obligation to file for bankruptcy, there have not yet been any major loan defaults. However, this regulation will end on December 31, which means that a wave of insolvency applications could roll in on the banks at the beginning of 2021. The financial institutions will probably have no choice but to react by strictly curbing costs. Deutsche Bank has already announced that it will cut a large number of jobs and close every fifth branch. In the future, the trend could also be to outsource more activities that can be used by several banks. In addition, more and more mergers seem to be taking place. Most recently, the major banks Bankia and Caixa have joined forces in Spain and in Italy UniCredit is to take over Monte dei Paschi.
In a list of the year's losers, Wirecard AG is of course not to be missed. The company for digital payment transactions went public in 2005. The prospects were promising, growth was outstanding, and the German government was also pleased with a touch of Silicon Valley in its own country. 15 years later, the hard case including insolvency application followed. In a huge balance sheet scandal, 1.9 billion euros are missing, which allegedly existed in various trust accounts. The money was probably only ever there on paper, to fake sales and profits and to get new loans. Since then, former COO Jan Marsalek has been on the run, who is on the run for a worldwide manhunt. The former CEO Markus Braun is in custody on remand. However, Braun refuses to give his testimony on almost all crucial issues. This complicates the work of the investigative committee, which has been working on coming to terms with the scandal since October.