Category: Stock Market

Are you looking to buy some dividend shares next week? Then listed below are two shares that might be worth considering.

Here’s what you need to know about them:

Accent Group Ltd (ASX: AX1)

Accent is a leading footwear-focused retailer that owns a number of retail store brands such as HYPE DC, Platypus, The Athlete’s Foot, and Sneaker Lab. It has also just launched a couple of new brands, Australian Stylerunner and Pivot. This is part of its store expansion plan, which is aiming to add ~80 new stores in FY 2021.

The company has been a very positive performer over the last 12 months despite the pandemic. In November Accent held its annual general meeting and revealed that its sales for the first 20 weeks of FY 2021 were well ahead of its expectations. Excluding its Auckland and Victorian stores, Accent’s like for like sales were up 15.7% over the period. Its online sales were even stronger thanks to the shift to online shopping. It reported a 129% increase in sales compared to the same period last year.

Analysts at Morgan Stanley expect the company to pay a fully franked dividend of 9.4 cents per share in FY 2021. Based on the latest Accent share price, this represents a 4% dividend yield.

Coles Group Ltd (ASX: COL)

Another dividend share to look at is Coles. This supermarket operator has been performing very positively this year. The company delivered a 6.9% increase in sales to $37.4 billion in FY 2020 and has followed this up with further strong growth in the first quarter of FY 2021.

During the three months that ended 30 September, Coles reported an impressive 10.5% increase in total sales over the prior corresponding period to $9.6 billion.

Goldman Sachs believes this has put the company in a position to deliver a strong result in FY 2021. So much so, the broker has put a buy rating and $20.50 price target on its shares and is forecasting a fully franked 64 cents per share dividend. Based on the latest Coles share price, the latter equates to a 3.5% yield.

More reading

• 2020 ASX recap of the year we’ll never forget
• 2 ASX dividend shares to buy for 2021
• Smash term deposits with these ASX dividend shares
• Why did the Accent (ASX:AX1) share price defy the odds in 2020?
• 2 star stocks for your ASX retirement portfolio

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Accent Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The arrival of COVID-19 in early 2020 changed life as we know it. Forecasts for the year were blown out of the water as the pandemic spread globally. The S&P/ASX 200 Index (ASX: XJO) fell 36% between February and March as concerns about the economic fall out shook investors.

The share market has slowly recovered over the course of 2020, but the recovery has been uneven. While many ASX shares have suffered directly or indirectly as a result of the pandemic, one sector has soared on pandemic tailwinds. Share prices have risen to record highs as a confluence of factors drive customer numbers skyward. We’re talking, of course, about buy now, pay later (BNPL) ASX shares. 

BNPL ASX sector of the year 

The BNPL sector gave the performance of the year with the top five ASX shares in the sector delivering serious share price gains. Let’s take a look at their performance over the past couple of years: 

Company	2019 share price change	2020 share price increase
Afterpay Ltd (ASX: APT)	153%	283%
Zip Co Ltd (ASX: Z1P)	249%	48%
Sezzle Inc (ASX: SZL)	-12%	362%
Splitit Ltd (ASX: SPT)	25%	70%
Openpay Group Ltd (ASX: OPY)	-2%	86%

Customer numbers climb 

ASX BNPL shares have seen customer numbers boom over this period. The dual forces of increased digital consumption and millennial spending power have seen BNPL services go from niche to mainstream in just a couple of years.

Increasing numbers of customers are ditching credit cards in favour of the instalment solutions offered by BNPL providers. The pandemic pushed greater numbers of consumers into shopping online, driving more customers to BNPL solutions. 

According to Mergermarket, Australian BNPL revenue amounted to $680 million in FY20 and is expected to reach $1.1 billion by FY25. Nearly 2 million Australians used a BNPL product last year, with BNPL growing from 3% of ecommerce payments in 2018 to 8% in 2019.

BNPL solutions are gaining ground at the expense of credit cards, which are less popular with millennials. COVID has also driven more consumers to the BNPL space, both due to increased online retailing and as an alternative way to finance purchases.

ASX BNPL shares benefit

You only have to take a look at the customer numbers of ASX BNPL shares to see these trends borne out.

Afterpay’s 6.1 million active customers at November 2019 had grown to 11.2 million by September 2020. Afterpay shares dropped as low as $8.90 in the March crash, but have staged one of the strongest recoveries in the ASX in 2020, rallying to above $120. Afterpay now has a market capitalisation of more than $34 billion and joined the S&P/ASX 20 Index (ASX: XTL) in the December quarterly rebalance. 

Afterpay is the largest BNPL player on the ASX. It reported $4.1 billion in underlying sales in the first quarter of FY21, a huge 119% increase on the prior corresponding period, which saw $1.9 billion in underlying sales. But Afterpay isn’t the only BNPL player seeing huge increases in customers and transactions. Zip Co saw customer numbers increase to 5.3 million by November 2020, up from 1.8 million at the end of 2019. Zip Co recorded quarterly transaction volumes of $943.1 million in the first quarter of FY21, a 96% increase year on year. 

Similarly, Sezzle reported customer numbers of 1.79 million at the end of the September quarter, with transaction volumes of $318.2 millon. This is nearly a threefold increase in customer numbers and fivefold increase in transaction volumes in a year — in the prior corresponding period, Sezzle had 644,509 customers and transaction volumes of just $68.8 million.

It’s a similar story for Splitit and Openpay — customer numbers and transaction volumes are increasing rapidly. 

Splitit reported 362,000 total shoppers in the September quarter, with 186,000 active shoppers. This was a 48% increase year on year. Over the same period transaction volumes increased 214% to US70.9 million.

Openpay had 372,000 active customers at the end of the September quarter, a 145% increase year on year. Transaction volumes were $68 million for the quarter, up 95% from $34.9 million in the first quarter of FY20. 

What’s next for the BNPL sector? 

So what’s next for the BNPL sector? According to Mergermarket, M&A activity is likely to take place in this space as players seek to consolidate market share. The number of competitors in the sector has been increasing over the past couple of years, with some retailers even offering their own BNPL solutions. Traditional finance players and neobanks are also looking at the space with interest.

Although there are some niche BNPL providers, many players are operating in the same space — financing small ticket purchases of under $1,000. BNPL providers need a critical mass of consumers to use their platform in order to attract merchants, so mergers would allow for consolidation of market share. 

BNPL shares performed strongly in 2018 and 2019, but came of age in 2020 as the pandemic pushed consumers to digital finance solutions. The regulatory concerns that plagued the sector have subsided for now, with industry players working with the Australian Securities and Investments Commission on a code of conduct.

As the sector matures, there is no doubt BNPL solutions are here to stay.  

More reading

• 2 important investment lessons from 2020
• The 5 best performing ASX 200 shares of 2020
• Top ASX shares to buy in January 2021
• Here are the best All Ordinaries performers of 2020
• The ASX sectors hardest hit by COVID-19 in 2020

Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) ended the final week of 2020 in a disappointing fashion. The benchmark index lost 1.2% of its value to finish at 6,587.1 points.

While a good number of shares dropped lower, some managed to defy the market weakness and push higher. Here’s why these were the best performers on the ASX 200 last week:

Omni Bridgeway Ltd (ASX: OBL)

The Omni Bridgeway share price was the best performer on the ASX 200 last week with a 10.8% gain. This may have been driven by a recent broker note out of Goldman Sachs. Its analysts are very bullish on the dispute resolution finance company and recently put a conviction buy rating and lofty $5.50 price target on its shares. This compares to the latest Omni Bridgeway share price of $4.30.

Sims Ltd (ASX: SGM)

The Sims share price was some way behind as the next best performer with a 5.1% gain. This was despite there being no news out of the scrap metal company. At one stage last week the company’s shares hit a two-year high. This is despite China no longer accepting scrap metal shipments from abroad as of 1 January.

Mineral Resources Limited (ASX: MIN)

The Mineral Resources share price was on form and charged 4.6% higher last week. This stretched its annual gain to over 125%. Investors have been buying the mining and mining services company due to its exposure to two of the hottest commodities around at the moment – iron ore and lithium. They appear to believe the company is well-placed to deliver a very strong result in FY 2021.

A2 Milk Company Ltd (ASX: A2M)

The a2 Milk share price continued its recovery and pushed 4.6% higher last week. This means the infant formula and fresh milk company’s shares have now rebounded by around 15% from their December low. Investors sold off the company’s shares last month after it was forced to downgrade its earnings guidance due to weakness in the daigou channel.

More reading

• The 5 best performing ASX 200 shares of 2020
• 3 top ASX share picks for 2021 from NZ brokers
• Why the A2 Milk (ASX:A2M) share price is down 18.5% in 2020
• ASX 200 drops lower
• Why these 3 ASX shares smashed it in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It was a disappointing finish to the year for the S&P/ASX 200 Index (ASX: XJO). The benchmark index fell 1.2% over the shortened week to end at 6,587.1 points.

Four shares that fell more than most are listed below. Here’s why they were the worst performers on the index last week:

Growthpoint Properties Australia Ltd (ASX: GOZ)

The Growthpoint Properties Australia share price was the worst performer on the ASX 200 last week with a 5.4% decline. This was driven by the property company’s shares trading ex-dividend for its interim dividend. For the same reason, APA Group (ASX: APA), Mirvac Group (ASX: MGR), Stockland Corporation Ltd (ASX: SGP), and Vicinity Centres (ASX: VCX) shares tumbled lower last week.

GUD Holdings Limited (ASX: GUD)

The GUD share price was out of form last week and dropped 4.2% lower over the shortened week. On Friday the automotive and water products company completed the acquisition of the ACAD business from AMA Group Ltd (ASX: AMA) for $70 million. This excludes the ACM Auto Parts and Fluiddrive businesses. Given that its shares have underperformed since announcing the deal, investors may not be overly convinced with the purchase.

QBE Insurance Group Ltd (ASX: QBE)

The QBE share price wasn’t far behind with a 3.7% decline. The insurance giant’s shares have come under pressure recently after it provided its guidance for FY 2020. QBE expects to report an adjusted net cash loss after tax of approximately $780 million. This includes a pre-tax impact of $470 million from COVID-19 costs. There are also additional claims from trade credit, lenders’ mortgage insurance, casualty classes and business interruption.

Bingo Industries Ltd (ASX: BIN)

The Bingo share price lost 3.6% of its value last week. While there was no news out of the waste management company last week, there had been speculation that it was a takeover target for private equity firms. However, with no bid forthcoming, some investors may have been selling its shares.

More reading

• The 5 worst performing ASX 200 shares of 2020
• The ASX sectors hardest hit by COVID-19 in 2020
• ASX 200 drops 1.4%
• 2020 ASX recap of the year we’ll never forget
• Cimic (ASX:CIM) share price wobbles on $2.2 billion sale news

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of APA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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As I mentioned here earlier today, IBM estimates that the pandemic has accelerated the shift to online shopping by as much as five years.

This bodes well for a number of companies on the Australian share market such as the ecommerce companies listed below.

Here’s what you need to know about them:

Adore Beauty Group Limited (ASX: ABY)

The first ecommerce company to look at is Adore Beauty. It is a recently listed online retailer which sells third-party beauty and personal care products to over 590,000 active customers across the ANZ region. From these customers, the company is expecting to generate revenue of $158.2 million in 2020. This will be up 76% on the prior corresponding period.

Pleasingly, this is still only scratching at the surface of its opportunity in the ANZ market. The company notes that Frost & Sullivan estimates that the ANZ beauty and personal care products market was worth $10.9 billion in 2019.

One broker that is positive on its prospects is Morgan Stanley. It has an overweight rating and $8.35 price target on the company’s shares. This compares to the current Adore Beauty share price of $5.38. It believes the company will benefit from the shift to online shopping.

MyDeal.com.au Limited (ASX: MYD)

Another ecommerce company to look at is MyDeal.com.au. It is an online retail marketplace provider with a focus on furniture, homewares, appliances, technology, baby products, and hardware.

Due to the aforementioned acceleration in the shift to online shopping this year, MyDeal has been a very strong performer. During the first quarter of FY 2021, the company delivered a 317% increase in gross sales to $56.67 million. This was underpinned by a 268% increase in active customers to 669,897.

Analysts at RBC Capital Markets are fans of the company. The broker has a buy rating and $1.60 price target on its shares. RBC Capital Markets thinks the company is at an inflection point as annualised gross transaction value exceeds $200 million and customer numbers approach 700,000.

More reading

• 2 growing mid cap ASX shares to buy
• Leading brokers name 3 ASX shares to buy today
• 2 growing small cap ASX shares to watch in 2021
• 2 exciting small cap ASX tech shares to buy
• 2 top ASX shares to buy according to WAM

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Happy New Year, Fools!

Welcome to 2021.

Frankly, I’d hoped for a cleaner, COVID-Community-Transmission-free, transition from last year to this, but turns out we don’t always get what we want. How very 2020.

Speaking of which, It is worth remembering that on this day, last year, we’d kind of heard of a new respiratory virus out of China, but had no idea just what a wrecking ball it would be.

Indeed, our time and attention was taken up primarily by the threat — and reality — of bushfires, unprecedented in size, scale and ferocity, that were menacing much of the country.

Yes, I know everyone is sick of the retrospectives.

My point, though, is a slightly different one: If we didn’t know what was coming on January 1, 2020, why would you listen to forecasts for 2021?

I’ve been asked plenty of times over the past two weeks for my 2021 forecast. Each time, I politely decline, admitting that I don’t know what’s coming, and nor does anyone else.

And then I recite one of my favourite quotes, from John Kenneth Galbraith: “Pundits forecast not because they know, but because they are asked”.

(The generous questioners laugh along. I dare say more than one of them makes a mental note to ask someone else next year. Such are the occupational hazards when you’re a financial adviser.)

So, if you can’t accurately predict the future, what should you do?

The first, hopefully self-evidently, is ‘don’t try’. 

Accept that you don’t know, and move on.

The second is that you should, in the sporting and management consulting jargon, ‘control the controllables’.

In other words, stop worrying about the things you can’t control, but endeavour to do well those things you have within your area of influence.

Those are the things that can meaningfully improve your odds of investment success.

And yes, because it’s New Year’s Day, let’s call them resolutions.

And here they come.

Spoiler alert, though. Well, two, actually.

One; this list isn’t new.

Two: it’s not magic.

This list is probably best considered the ‘get rich slowly’ list.

I can offer no guarantees (legally, or morally).

But this list is, in my view, the best foundation you can have, as you continue (or start) a journey to wealth creation.

No, it can’t beat a trust fund, a lotto win, or an inheritance.

It won’t instantly lower your bills or get you a pay rise.

But it’s a list of actions and approaches that I think will put — and keep — you on the straight and narrow as you steadily build your wealth.

So here’s to 2021. And to just a little less drama than last year…

Fool on!

13 Foolish New Year’s Resolutions

To help you invest, better!

1. I will live below my means — spending less than I earn.

2. I will save money into a rainy-day fund so I’m ready for what life might bring.

3. I will pay off my credit card debt, and then only spend what I can pay off within the interest free period each month.

4. I will regularly add to my investment account.

5. I will invest money I don’t need for at least 3-5 years to build my nest egg.

6. I will learn more about investing, taking control of my financial future.

7. I will invest in quality businesses, buying a slice of the company, not just a code on a screen.

8. I will buy shares in a company with the intention of holding them for the long term.

9. I will sell when my investment thesis fails, the company is overvalued or I have a better idea.

10. I will avoid anchoring my decisions to the price I paid for my shares.

11. I will remember that the market can be moody and over-react, both on the upside and the downside.

12. I will expect volatility, and I won’t let it spook me into selling. Indeed, volatility can offer me great opportunities!

13. I will let the market offer me prices (be my servant), not dictate my mood or actions (be my master).

(Want a printable version? I’m glad you asked. Here it is!)

More reading

• 2 important investment lessons from 2020
• The 5 worst performing ASX 200 shares of 2020
• The 5 best performing ASX 200 shares of 2020
• Stock market rally: are there any shares that could double my money in 2021?
• Top ASX shares to buy in January 2021

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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2020 is certainly a year that we will not forget in a hurry. Never before (and hopefully never again) have we seen such incredible volatility on the Australian share market.

At the height of the pandemic, there were days when the S&P/ASX 200 Index (ASX: XJO) moved more in a single session than it would ordinarily do in a whole year. This was much to the delight of day traders, who thrive on volatility.

But for the average investor, this volatility was unsettling and a lot of tough lessons were learned over the last 12 months.

Here are two lessons learned during 2020:

Diversification is important.

Over the last few years, the bull market has seen most shares and sectors heading higher. In light of this, investors could be forgiven for entering 2020 without a truly diversified portfolio. However, the last 12 months have demonstrated just how important diversification is.

At the start of the year, nobody could have predicted what would happen to the travel market and thus the shares of Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB). Investors that were overweight with travel shares will have undoubtedly underperformed investors with more balanced portfolios.

Market crashes are opportunities.

When the share market is crashing and the ASX boards are a sea of red, it can be hard not to panic. But, as Warren Buffet once quipped, “Be fearful when others are greedy, and greedy when others are fearful.” The latter certainly proved to be excellent advice during the COVID-19 pandemic.

For example, at the height of the crisis the Afterpay Ltd (ASX: APT) share price dropped as low as $8.01 and the SEEK Limited (ASX: SEK) share price fell to a low of $11.23. Since then, the two companies have seen their share prices rise a massive ~1400% and 154%, respectively. This means that $10,000 investments at their lows would now be worth $150,000 and $25,400. Anyone brave enough to be greedy in March, will have been rewarded handsomely.

More reading

• The 5 worst performing ASX 200 shares of 2020
• The 5 best performing ASX 200 shares of 2020
• Top ASX shares to buy in January 2021
• Here are the best All Ordinaries performers of 2020
• The ASX sectors hardest hit by COVID-19 in 2020

Motley Fool contributor James Mickleboro owns shares of SEEK Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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What a year it was for the S&P/ASX 200 Index (ASX: XJO) in 2020. The benchmark index lost 1.4% of its value over the 12 months to end it at 6,587.1 points.

But it could have been so much worse. At the height of the pandemic the index had lost a third of its value.

Unfortunately, not all shares on the index rebounded as strongly and some recorded very disappointing declines.

Here’s why these were the worst performing ASX 200 shares of 2020:

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price was the worst performer on the ASX 200 in 2020 with a 60% decline. With the pandemic bringing both domestic and international travel to a standstill earlier this year, this travel agent giant’s bookings collapsed to previously unthinkable levels. So with little to no revenue coming in, Flight Centre was forced to raise funds to keep its operations going. Significant cost cutting means that its cash burn has reduced materially, but recent COVID outbreaks in Australia have sparked fears that its recovery could take a bit longer than hoped.

Unibail-Rodamco-Westfield CDI (ASX: URW)

The Unibail-Rodamco-Westfield share price wasn’t far behind and crashed 54.4% lower in 2020. The shopping centre operator is another company that was impacted negatively by the pandemic. Lockdowns, social distancing initiatives, and the shift to online shopping, meant that the company’s shopping centres were like ghost towns for much of 2020. This put a lot of pressure on rental collections and occupancy rates.

IOOF Holdings Limited (ASX: IFL)

The IOOF share price was out of form in 2020 and sank 51.4% lower. This financial services company’s shares came under pressure for a couple of reasons. One was its $1,040 million capital raising, which was undertaken at a 24.4% discount (at the time) of $3.50. This was launched to fund the acquisition of the National Australia Bank Ltd (ASX: NAB) wealth business, MLC Wealth for $1,440 million. Also weighing on its shares was its poor performance in FY 2020. IOOF reported a 34.9% decline in underlying net profit after tax to $128.8 million.

Oil Search Ltd (ASX: OSH)

The Oil Search share price was a poor performer and dropped 47.5% over the 12 months. Investors were selling this energy producer’s shares last year after oil prices collapsed amid demand concerns. Incredibly, at one stage in 2020 oil futures were actually in negative territory, which meant buyers were being paid to take oil off their hands. And while prices have been recovering in recent months, it hasn’t been enough to drive the Oil Search share price back to previous levels.

Webjet Limited (ASX: WEB)

The Webjet share price wasn’t far behind with a 46.4% decline in 2020. As with Flight Centre, this decline was driven by the pandemic’s impact on travel markets and the company’s need for a cash injection to keep it afloat. The good news for Webjet is that it looks set to come out of the crisis in a stronger market position and has seen its bookings recover twice as quickly as the market average.

More reading

• The ASX sectors hardest hit by COVID-19 in 2020
• ASX 200 drops 1.4%
• 2020 ASX recap of the year we’ll never forget
• Cimic (ASX:CIM) share price wobbles on $2.2 billion sale news
• Here’s how the S&P/ASX All Technology Index fared in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It certainly was an eventful year for the S&P/ASX 200 Index (ASX: XJO) in 2020.

After losing as much as a third of its value at the height of the pandemic, the benchmark index was on course to finish the year flat until a last minute selloff on 31 December. This ultimately led to the ASX 200 index recording a 1.4% decline for the year.

The COVID-19 pandemic dominated the headlines last year and had a major impact on the performance of Australian companies.

While some companies were impacted negatively, others benefited greatly from changing consumer behaviours, the working from home initiative, and other tailwinds.

Listed below are the five best performing ASX 200 shares in 2020. Here’s why they were on fire over the 12 months:

Afterpay Ltd (ASX: APT)

The Afterpay share price was the best performer on the ASX 200 in 2020 with a whopping 303% gain. However, that gain is only telling you half the story. At the peak of the crisis, the Afterpay share price had plunged to a two-year low of $8.01 after investors panicked that bad debts would spike and underlying sales would collapse. However, those fears were extremely wide of the mark and Afterpay recorded exceptionally strong growth in the ANZ and US markets without compromising its bad debts. This led to the Afterpay share price ending the year at $118.00, which is a staggering ~1400% higher than its March low.

Kogan.com Ltd (ASX: KGN)

The Kogan share price was the next best performer with a 150% gain. This ecommerce company was one of the biggest winners from the pandemic thanks to the dramatic shift to online shopping. With bricks and mortar stores forced to close during lockdowns, consumers flocked online for their shopping. Many for the first time. This resulted in Kogan reporting explosive customer, sales, and profit growth. According to a report by IBM, the pandemic has accelerated the shift away from physical stores to online stores by approximately five years.

Mineral Resources Limited (ASX: MIN)

The Mineral Resource share price was a strong performer and stormed 127% higher in 2020. The catalyst for this was the mining and mining services company’s exposure to two of the hottest commodities of 2020. A rebound in lithium prices due to electric vehicle optimism and a surging iron ore price got investors excited.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue share price wasn’t far behind with an impressive 119% gain in 2020. As one of the world’s leading iron ore producers, investors were fighting to get hold of its shares after the price of the steel making ingredient jumped to multi-year highs. This was driven by supply constraints in Brazil and robust demand in China as it invests heavily in infrastructure to boost its economic growth. The iron ore price ended the year at US$155.84 per tonne. This compares incredibly favourably to Fortescue’s C1 costs of US$12.74 per wet metric tonne.

Netwealth Group Ltd (ASX: NWL)

The Netwealth share price was on form in 2020 and recorded a 104% gain. The investment platform provider was a strong performer in FY 2020 despite the pandemic. For the 12 months ended 30 September, Netwealth delivered a 21.7% increase in underlying net profit after tax to $43.8 million. The catalyst for this was a 35% increase in funds under administration (FUA) over the 12 months to $31.5 billion. Pleasingly, this strong form has continued since then, with Netwealth ending the first quarter of FY 2021 with FUA of $34 billion.

More reading

• Top ASX shares to buy in January 2021
• Here are the best All Ordinaries performers of 2020
• The ASX sectors hardest hit by COVID-19 in 2020
• 2020 ASX recap of the year we’ll never forget
• 3 ASX shares to buy for 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Netwealth. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The stock market rally following the 2020 market crash has caused many shares to double in value over recent months.

Despite this, there are still a wide range of companies that appear to offer good value for money. Since the stock market has historically produced a sustained recovery following its declines, there may be scope for investors to double their money through buying shares today.

By taking a long-term view and purchasing high-quality companies at low prices, an investor could capitalise on the stock market’s likely long-term growth prospects.

Caution after the recent stock market rally

While the recent stock market rally may have caused optimism to rise among investors, a number of risks could negatively affect share prices in the short run. For example, political change in Europe and the US may negatively impact investor sentiment. Meanwhile, coronavirus is set to remain a threat to the operating environments of many companies. This may lead to disappointing share price performances in the coming months.

Therefore, it is crucial to take a long-term view of any investments made today. Certainly, there is potential for a number of shares to double in price from their current levels. However, expecting the recent stock market recovery to continue unabated in 2021 may lead to disappointment for investors, as well as paper losses in the short run.

The past performance of the stock market

Despite threats to the 2020 stock market rally, the long-term outlook for shares is relatively positive. Even after gains made in recent months, there continue to be a number of high-quality companies trading at low prices. Historically, they have offered the greatest scope for capital gains. Not only do they offer less risk in the short run due to the strength of the company’s market position and financial situation, their low prices offer capital growth potential.

Furthermore, the stock market has always produced new record highs following even its most challenging periods. For example, indexes such as the FTSE 100 Index (FTSE: UKX) have recorded total annual returns of around 8% since inception. Assuming the same return in future would mean it takes around nine years for an investment today to double in price. But, through purchasing undervalued stocks, it is possible to outperform the index and generate 100% returns over a shorter time period.

Building a solid portfolio of shares

It can be tempting to forget about risk management following a stock market rally such as that seen in 2020. However, it is important to always bear risk in mind, since the stock market can experience rapid change without warning.

As such, building a diverse portfolio of high-quality shares trading at low prices could be a shrewd move. It may allow an investor to capitalise on the stock market’s likely growth in the coming years, while reducing company-specific risk.

More reading

• Top ASX shares to buy in January 2021
• Here are the best All Ordinaries performers of 2020
• The ASX sectors hardest hit by COVID-19 in 2020
• ASX 200 drops 1.4%
• 2 ASX dividend shares with 4%+ yields

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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