National Post (National Edition)
WINNERS & LOSERS
Winners and losers from a wild year of investing.
MODERN A INC.
By the time the world realized it was in the throes of a pandemic, the race to create a vaccine for the novel coronavirus was already well underway. For investors in Cambridge, Mass.-based Moderna Inc. and some of the other leading vaccine contenders, backing a world-saving mission has come with financial rewards, too. Moderna's share price is up more than 500 per cent for
2020 and its vaccine, which doesn't need to be stored at as low a temperature as the one developed by rivals Pfizer Inc. and BioNTech SE, is being rushed into use. While a lofty valuation could be tested over the coming year, demand for the vaccine is likely to fuel Moderna's bottom line for a long time to come: Canada alone, for example, has already ordered up to 56 million doses. Clearly, hope sells.
A typical Black Friday sees people rush out to brick-and-mortar stores to grab anything that's discounted and/or not bolted down. This year, though, while a lot of people still shopped, many made their purchases from home. One of the beneficiaries of this shift to online shopping has been Ottawa-based Shopify, which trumpeted that sales of more than US$5.1 billion were made by businesses using its digital storefronts over the Black Friday weekend, up 76 per cent from a year earlier. One of the few things more explosive than that growth was the rise in Shopify's stock price, which has climbed more than 190 per cent for 2020. In May, the e-commerce company's market value surpassed that of Royal Bank of Canada to make it the country's largest publicly traded company for the first time — it now enjoys a $40-billion lead.
While people were stuck at home this year, some of them looked around and really disliked what they saw. Many of them then decided to do something about it, sparking a home renovation boom. That reno rush, some supply cuts and housing markets that have refused to quit during the pandemic have all helped to essentially double the market price of lumber over the course of this year. The random length lumber futures contract for January has soared beyond US$850 per thousand board feet in Chicago, rivalling summer price peaks despite the winter months typically being slower ones for the construction industry. Considering that housing markets are still holding up and that people still can't really go anywhere, that level of demand could persist. For instance, Canadian housing starts increased more than 14 per cent in November over the previous month, beating analyst expectations. And there's always something to be done around the house.
Shares of electric carmaker Tesla were already having a pretty good 2020 even before it was announced the Palo Alto-based based company would be added to the S&P 500 stock index on Dec. 21. But the index news helped propel Tesla shares even higher, which meant that as of mid-December they were up more than 650 per cent for the year. Some investors may also find themselves now owning a piece of Tesla whether they planned on it or not, as the decision to add the company in the S&P 500 required a number of index-connected funds to buy its stock and include it in their holdings. Although a five-for-one stock split at the end of August (“to make stock ownership more accessible to employees and investors,” the company said) put a dent in Tesla's share price, it was buffed out by November. For the short sellers daring to take on billionaire CEO Elon Musk, who continues to tweet his sometimes-controversial thoughts with delight, it has been a rough ride indeed.
What do you do when there's no sports, nowhere to go and no sign that interest rates are going up anytime soon? The answer for a wave of rookie investors this year was to start playing the stock market, creating a surge in daytrading that helped fuel the market rebound. In the first quarter of this year, discount online brokerages in Canada added half-a-million new accounts, according to research firm Investor Economics. That's three times the normal rate. Meanwhile, using commission-free trading apps like those provided by Robinhood in the U.S. and by Wealthsimple in Canada, a new generation of investors jumped into plays that old hands were avoiding, such as by trading in pandemic-stricken shares of airlines or bankrupt rental-car company Hertz Global Holdings Inc. The coming year could tell if the motto of Dave Portnoy, founder of controversial U.S. sports media site Barstool Sports and a leading figure of the pandemic daytrading phenomenon, is indeed correct. Do stocks really only go up?
Do much travelling outside of Canada this year? No? Well, that should give you a hint of how things went in 2020 for the shareholders of some airlines, cruise companies, hotels and other travel and hospitality-related firms. Even if people could go places, the pandemic made sure that not as many of them would. As a result, stocks such as Carnival Corp. (down more than 50 per cent for 2020 as of mid-December), United Airlines Holdings Inc. (down more than 45 per cent) and Marriott International Inc. (down 15 per cent) got crushed. Air Canada also shed more than 50 per cent of its value this year as the pandemic and related restrictions imposed by governments weighed on air travel. What's more is that, in a sign of the times, Air Canada, Canada's biggest airline, was forced to revise its proposed acquisition of Transat A.T. Inc., slashing the bid for its smaller rival to $5 per share from $18 per share. The arrival of a vaccine, though, has given the industry reason for hope.
For oil producers, 2020 was the year of the double whammy. COVID-19 crushed travel-related demand and Russia and Saudi Arabia butted heads over production cuts back in March, levelling the price of oil. Then came April, during which the West Texas Intermediate benchmark for oil fell into negative territory at one point for the first time in its history, as traders scrambled to unload their holdings. Although the gradual comeback of the economy has helped crude prices, 2020 overall will go down as a rough year for the energy sector. WTI was still off more than 20 per cent for the year in mid-December and the S&P/ TSX Capped Energy Index of Canadian oil and gas producers was down more than 35 per cent. Firms have tightened their belts, and the hostile climate has also sparked consolidation in the industry, such as Cenovus Energy Inc.'s $3.8-billion acquisition of Husky Energy Inc. (although the pricetag on the all-stock deal has likely risen as Cenovus shares have climbed recently). The oilpatch could be in for further tightening.
Bombardier-watching is something of a national pastime for Canadians. After all, the Montreal-based manufacturer has been the recipient of much financial support from taxpayers over the years, making the state of the company a political issue from time to time. However, the biggest issue for investors this year might have been Bombardier's stock price. Bombardier's Class B shares were down around 75 per cent for 2020 as of December, and they were dropped from Canada's benchmark stock index in June, as the company tries to reinvent itself as a maker of business jets only. That plan took a step forward in early December after it was announced that all the necessary regulatory approvals were received for the sale of Bombardier's rail division to France's Alstom SA, with the deal expected to close near the end of January. Even so, Bombardier has other problems, chief among them that it remains saddled with billions in debt and was revealed to be the subject of an investigation by the U.K.'s Serious Fraud Office in November.
At around this time in 2019, Cineplex stock was enjoying a significant pop following news that the Canadian movie-theatre operator was being bought by the U.K.'s Cineworld Group Plc in an approximately $2.8-billion deal. The transaction would have created one of the world's biggest cinema companies; would have, because it fell apart in June amid a pandemic that has forced theatres to close or to show films with fewer customers in the audience. This year Cineplex shares have fallen more than 70 per cent, while the company has seen similar declines in both revenue and theatre attendance. The lingering coronavirus has also forced provinces to reimpose restrictions on certain businesses, including movie theatres. Still, the arrival of a vaccine is bound to be a sight for sore eyes at the Toronto-based entertainment company.
Investors in government debt have likely felt some unease this year, as COVID-19 caused both public-sector revenue to dry up and spending to skyrocket, putting pressure on sovereign borrowers with big pre-pandemic liabilities. For Zambia, those chickens came home to roost in November, as the country defaulted on part of its debt, making it the first African country to do so during the pandemic. That default was preceded by debt restructurings by Argentina and Ecuador. Lebanon, meanwhile, has been in default on its loan payments since March. The G20 group of countries (which includes Canada) has backed a “Debt Service Suspension Initiative” that permits eligible countries to suspend official bilateral debt-service payments during the pandemic, allowing nations to spend that money elsewhere. However, the leaders' declaration published following November's G20 meeting noted that the “the scale of the COVID-19 crisis, the significant debt vulnerabilities and deteriorating outlook in many low-income countries” may require additional help on a case-by-case basis. Bad haircuts may not just be a 2020 thing.