The S&P 500 made a swift and powerful recovery in 2020. After dropping to a multi-year low of $2,220 in March, the stock bounced back by more than 65% and reached an all-time high of $3,720. This rally was mostly supported by the technology sector, with companies like Apple and Microsoft testing new highs. It was dragged by energy and travel stocks. Here, we will look at the 5 best-performing S&P 500 stocks in 2020.
S&P 500 2020 performance
Etsy is a double-sided e-commerce platform that allows people to sell their crafts. The firm makes money by charging sellers fees such as payment servicing, advertising, and hosting fees. It also charges them a commission whenever they sell their products. The firm has a market cap of more than $24 billion and an enterprise value of about $23 billion.
Etsy was the best-performing stock in the S&P 500, rising by more than 330%. This happened as the COVID pandemic pushed people to e-commerce. It also pushed more laid-off people to start their handmade stores such as masks as a way of making money.
As a result, Etsy’s revenue and profitability rose. In 2019, it generated more than $818 million in revenue and $95 million in profit. In the trailing twelve months (TTM) to the third quarter, the firm’s revenue increased to more than $1.3 billion while its profit rose to more than $232 million.
So, will Etsy continue to fire on all cylinders? We believe that 2021 will be a mixed year for the firm. While the gross merchandise volume (GMV) will possibly continue rising, we believe that the seller-growth will start to decline. That’s because more people will go back to work and leave their side hustles. Also, most people who started their own stores will possibly not succeed because of how competitive the industry is.
Etsy vs. S&P 500
Carrier Global (CARR)
Carrier Global is a company that manufactures air conditioners, ventilators, refrigeration, and HVAC products. It serves residential, commercial, transportation, commercial, and fire safety industries.
Carrier entered the S&P 500 this year after it became an independent company. Before this, it was owned by United Technologies, the company best-known for its military contracts. United completed the spin-off during its acquisition of Raytheon Technologies.
Carrier stock did well in 2020 as it rose by more than 200%. This happened primarily because of two main reasons. First, in the past few years, investors have always favored spin-offs like PayPal and Match Group. Second, the pandemic led to greater demand for heating and cooling products.
Most importantly, Carrier is an undervalued company that has a forward PE of 24. This is lower compared with peers like Otis, Trane Technologies, and even Raytheon.
The strong upward trend will possibly continue, albeit at a slower rate in 2021. This growth will possibly be fuelled by strong international growth.
Carrier Global vs. S&P 500
Nvidia is a leading technology company that specializes in Graphical Processing Unit (GPU) development. It is a well-known brand whose products are used in computing, artificial intelligence, data centers, healthcare, networking, and self-driving cars.
2020 was a successful year for the company as demand for its products rose. For example, demand from gamers increased as more people moved to stay at home. Similarly, in cloud computing, the firm continued to see demand as more companies accelerated their cloud transition.
Most importantly, the company announced that it would acquire Arm Technologies in a deal valued at more than $40 billion.
As a result, Nvidia’s stock rose by more than 100%, becoming the second-best performer in the S&P 500. That brought its market cap to more than $328 billion, making it a bigger firm than Intel and IBM combined.
Nvidia’s shares will possibly continue rising in 2021, albeit the performance will not be as strong as in 2020. The focus will remain on its Arm acquisition.
Nvidia vs. S&P 500
PayPal had a strong year as the pandemic pushed more people to boost their digital transactions. The firm added millions of new users, the most in history. It now has more than 324 million active users across its assets.
This led to a sharp increase in its revenue. In total, the firm generated more than $20 billion in revenue in the past twelve months and a net income of more than $3.1 billion. This performance was significantly better than in the previous year.
PayPal also made a major announcement when it revealed that it would start digital currency transactions. This could be a major move considering that Bitcoin trading generates billions of revenue for Square.
All this made PayPal the fourth-best-performing S&P 500 company as its share price rose by more than 115%, bringing its market cap to more than $277 billion. This trend will possibly continue in 2021 since the users it acquired this year will continue doing these transactions.
PayPal vs. S&P 500
L Brands (LB)
L Brands is a leading retailer that is best known for its ownership of Victoria’s Secret, PINK, and Bath & Body Works. After years of struggling, the company bounced back in 2020 after it revealed that it was divesting its Bath & Body Works brand. That saw its share price rise by more than 114%, bringing its market cap to more than $10 billion.
In 2021, the stock will possibly continue rising as investors wait for the divesting of Bath & Body Works. However, we are skeptical about whether the firm will continue rising throughout the year. That’s because there will be no major events in addition to the divesting. Also, the firm will continue to face the same challenges it did previously.
L Brands vs. S&P 500
2020 was a difficult but highly successful year for global investors. While the world went through a depression, the support from central banks helped to boost asset prices. Will this trend continue in 2021. Maybe. Will the best-performers in 2020 be the best performers in 2021. Unlikely.
In addition to the five firms mentioned, others that did well in 2020 were AMS, Servicenow, Freeport McMoran, Albemarle, and Alight Technology.