Happy New Year 2021!
May this year bring be the end of the Coronavirus globally.
The year 2020 was altogether odd. In terms of investments it seems that Wall Street and Main Street are (again) drifting apart. After the COVID-induced market crash of early 2020, the market has rebounded and then some. Those of us with exposure to technology stocks have done well. However, it does not feel as good as if the same would apply the economy at large.
Some of the hottest stocks have gone through the roof and continued to climb further from the point where I considered them being extremely expensive (like NVIDIA in July). Still, I do not consider starting rotation from NASDAQ darlings to more dull main street names being a mistake in the long run. There are signs of gross overpricing if not bubble in some tech sector names similarly to the great tech bubble 1999-2000. Ever crazier valuations are justified with questionable logic.
If you assume low enough weighted average cost of capital or perhaps some growth to perpetuity, then you can pretty much justify any valuation. Divide by zero yields infinitely valuable stock.
Still, you can find also reasonably priced stocks even in the technology sector, but usually they come with a short or medium term challenge (like Nokia or Intel). Outside of tech sector it gets easier and you may not even have to discount for any headwind. For the sectors that were hit hardest (travel, restaurants, events etc.) it will take long time to recover.
Portfolio performance 2009-2020 (chart).
Portfolio performance 2009-2020 (table).
In terms of cumulative yearly gains, we are now 57,2% above the benchmark investment.
Our best performing stocks this time included stocks both from Finland and USA. In Finland it was in particular the small and mid caps that did well and in USA our semiconductor plays delivered (especially Micron and NVIDIA until we let it go in the middle of the year).
In the next post, I will cover our starting allocation for 2020. As usual, we continue to be almost fully invested into stocks. However, rotation towards lower risk stocks started in 2020 and is expected to continue during 2021.
*) The "benchmark investment" is an imaginary passive ETF that closely tracks the performance of MSCI all country world (ACWI) index in euros (more info here).
