A Year Unlike Any Other
For more than one reason, 2020 was an historic year. A global pandemic started, the stock market crashed (and then quickly rose to new highs), and we all found out that Carole Baskin killed her husband. The year also brought more retail investors into the stock market than ever before. While I did not enter this year, I am a retail investor. I’ve learned a lot while investing over the years, but this year taught me more than any other. I’d like to share some of what I’ve learned, my most successful picks, and what I’m planning on doing in 2021.
You’re Probably Tired of Hearing It by Now
I consider myself a fairly risk-averse investor. I diversify. I don’t chase headlines. I have a slight spring in my step during dividend season each quarter. In February, I was having the time of my life. My portfolio had just hit a new all-time high and all my stocks were green. Then a month later, as the virus spread and lockdowns started, I was quickly at an all-time low (financially speaking).
My hand hovered over the sell button every single day. The urge to liquidate my positions gnawed at me as I watched circuit breakers get triggered. I compromised with myself, converting 25% to cash and strapping in for the rest of the ride. Around mid-May, still about 10% down from The Before Times, I knew my portfolio had to be completely rebuilt for the post-COVID world. I wasn’t sure where to start, but I was just happy that the market recovered as well as it did.
We’ve heard it all before, but it bears repeating: do not try to time the market. If I had sold as much as had wanted to as soon as I had wanted to do it, not only would I have lost a lot of money, but even with the unprecedented rebound we’ve experienced, I’m not sure I would have recovered fully, let alone pushing new all-time highs, like I am now.
We Can Rebuild It
I liquidated my entire stock portfolio (minus my 401k). Then I bought back stocks that I wanted to keep from my old portfolio—discounted blue chip companies and long thesis like 5G and alternative energy. Before the pandemic I didn’t have very much exposure to healthcare in my portfolio, and that had to change. Bets had been placed on vaccine production, so I had to look for value elsewhere.
With lockdowns in place, most REITs were ruled out, and tech stocks were given a much larger percentage of my portfolio than pre-COVID (currently about 40%). I also made sure to purchase quality consumer staples stocks who hadn’t recovered as easily as others.
With a diverse cast of characters (and a sizable cash position for contingency), I was ready for anything 2020 tried to throw at me.
Where Are We Now?
Now, I’ve been tracking progress for my newly-rebuilt portfolio for just seven short months, but I’ve already identified my top performers, as well as a couple stocks that have disappointed me. Let’s start with the bad news first.
Disappointments
Tyson Foods, Inc. (TSN)
Tyson is a holdover from my old portfolio. Initiated my position way back in 2017 when trade negotiations with China were ongoing. According to the rumor mill back then, China was to agree to increase its pork imports from the United States, and the dividend was pretty attractive too. The business and financials were solid. A great long term play! That is, until they horribly mismanaged their COVID response, plant managers were caught making bets on how many workers would contract the virus, and a now-partially-settled price-fixing lawsuit.
Compared to when I opened the position in 2017, I’m pretty much flat, not including DRIPs. Underwhelming for sure. Plant-based meat alternatives are still growing, but not stealing much market share at the moment. I’m neutral here for now, but that may change depending on how the next few months go.
Realty Income Corporation (O)
Now, don’t get me wrong, I absolutely love O as a company, and have no intentions of selling. But in terms of recovery from COVID-19, they still have a long way to go. As long as the virus is still actively spreading, many of their tenants are heavily impacted, and rent collection can be called into question. Recently they also recently sold 10.5M shares to fund acquisitions, dropping the stock price around 4% overnight. Though it’s not all doom and gloom, with rent collection most recently reported at over 93% and, about a month before issuing new shares, management paid back $950M of outstanding notes that were due 2022. I love their monthly dividend, and management has historically been fantastic. I expect them to come out of the pandemic stronger than they were when it began.
Top Performers:
Enphase Energy, Inc. (ENPH)
Anyone who’s been paying attention to the stock market over the past year knows that alternative energy has been on a massive bull run. And if you’re new to the market, let me tell you: alternative energy has been on a massive bull run. Before it achieved profitability, I traded ENPH fairly regularly. They have a wide technological moat compared to their competitors, and the much-anticipated product, the IQ8, will be micro-grid capable (which is good). Once they reached profitability, I opened a long position and kissed the days of trading goodbye. So far, I’m up well over 200%
The Walt Disney Company (DIS)
The core of Disney’s business is its parks, and those were shuttered completely at the beginning of the pandemic and have yet to reopen fully. The blow to Disney’s top line was so severe, the company actually posted a loss for the first time since 2001, despite suspending their dividend for the foreseeable future. However, Disney is trading at all time highs because of the unimagined success of its streaming service Disney+, which exceeded both analysts and management’s expectations.
While I’m still bullish on Disney in the long term, I think that they are currently extremely overvalued. The void left by the parks can’t be made up by streaming alone. I’ve learned the hard way not to bet against The Mouse, and I won’t start now.
Looking Forward
I’m optimistic that 2021 will get better. Vaccines are being distributed and the incoming Biden administration has big plans for their first hundred days. The major cause of instability will be under control (knock on wood), and a knowledgeable politician has the strength in the legislature to enact policy that’s proven successful in the past.
I fully intend to hold all the stocks I’ve discussed here, and I intend to grow my portfolio. I’ll share my research with you as well as updates on my performance now and then. I wish you all the best of luck investing. May we all retire early!