By any measure, 2020 was a tough year for investors. After a gentle start, all hell broke loose as Covid-19 waves washed over the world. This sent the FTSE 100 index plunging at the fastest rate I can recall since its creation in 1984.
The FTSE 100’s March meltdown
At the end of 2019, the FTSE 100 closed at 7,542.4 points. It then gently climbed, peaking at 7,674.6 on 17 January. Alas, this 1.8% rise gave no hint of the perfect storm to come. As Covid-19 spread globally, stock markets assumed the crash position. With investors all rushing to sell risky assets, share prices collapsed.
By 23 March 2020 (‘Meltdown Monday’), the FTSE 100 had lost 2,680 points since its 2020 peak to close at 4,993.90. Thus, the UK’s main market index had collapsed by more than a third (34.9%) in under 10 weeks. That’s among the steepest and most brutal market crashes I’ve seen in 35 years of investing. But, as billionaire investor Warren Buffett remarked, “Be fearful when others are greedy and greedy when others are fearful”.
Buying in March 2020 was a great move
In late March 2020, as the world was swamped with fear, I decided to be greedy. One reliable investment rule I’ve absorbed is to buy big when asset prices are low. Generally speaking, paying low prices for decent stocks is a winning strategy, especially with time on your side. A year ago, my wife and I pumped all of our cash into shares, mainly US and global stocks.
The bumper returns over the past year have been outstanding (enough to retire today, should we wish to). As for the FTSE 100, it stands at 6,734.71 points today. That’s a healthy gain of over 1,740 points since Meltdown Monday. This equates to a rebound of more than a third (34.9%) in just over 12 months. Nice.
Not all FTSE 100 shares bounced back
Of course, not all FTSE 100 shares have gained in value, like these five big winners. In fact, over the past year, nine of the Footsie’s 101 shares have actually fallen in value. For the record, these are the FTSE 100’s six biggest fallers in the year to today:
BAE Systems (aerospace engineering) -8.1%
National Grid (electricity & gas utility) -8.7%
BP (oil & gas) -10.2%
GlaxoSmithKline (pharmaceuticals) -13.6%
HSBC Holdings (global bank) -15.1%
Rolls-Royce Holdings (aero-engine maker) -23.6%
I like two of these losers
The first theme among these losers is air travel. BAE Systems and Rolls-Royce have been walloped by the collapse in airmiles flown. With international air travel not expected to return to normal before 2024, it could be tough going for FTSE 100 stalwarts BAE and RR.
The second theme among these laggards is energy. As oil prices collapsed, former FTSE 100 heavyweight BP took a beating in 2020, before bouncing back since November. Likewise, National Grid shares have suffered due to reduced energy usage. Of the two remaining losers, HSBC has suffered due to its status as one of the world’s leading lenders. And GSK has suffered a hit to earnings as routine vaccinations were cancelled during the Covid-19 crisis.
As a committed value investor, I try to find tomorrow’s winners from today’s losers. Hence, I love rooting around in the FTSE 100’s bargain bin, looking for beaten-down shares in solid businesses. Of the above six losers, I most like the look of HSBC and GSK. Any strong economic recovery post-Covid-19 would benefit these two stocks, so they are both on my watchlist.