The Mesoblast limited (ASX: MSB) share price has returned from its trading halt and crashed significantly lower.

In early trade the biotechnology company’s shares are down a massive 45% to $2.08.

Why is the Mesoblast share price crashing lower?

Investors have been selling the company’s shares this morning after it provided an update on the randomised controlled trial of its remestemcel-L product in ventilator-dependent patients with moderate to severe acute respiratory distress syndrome (ARDS) due to COVID-19 infection.

According to the release, the Data Safety Monitoring Board (DSMB) has performed a third interim analysis on the trial’s first 180 patients.

The trial was aiming to achieve a primary endpoint of 43% reduction in mortality at 30 days for treatment with remestemcel-L on top of maximal care in a trial of 300 patients.

This target was based on pilot data observed during the initial stages of the pandemic when control mortality rates were exceedingly high. It was also prior to new evolving treatment regimens that have reduced disease mortality in ventilated patients.

While the DSMB has reported that there were no safety concerns, importantly, it noted that the trial is unlikely to meet the 30-day mortality reduction endpoint at the planned 300 patient enrolment.

In light of this, the DSMB has recommended that the trial be ended early at just 223 enrolled patients.

What now?

While the primary endpoint has not been achieved, management is pushing ahead to see if it achieves its secondary endpoints.

These include days alive off mechanical ventilation at 60 days post randomisation, overall survival, days in intensive care, duration of hospitalisation, and cardiac, neurological, and pulmonary organ damage.

What went wrong?

The company has suggested that changes in the treatment regimens for COVID-19 patients are to blame for the trial’s failure.

It explained: “During the course of the trial, as the pandemic has evolved, numerous changes in the treatment regimens for COVID-19 patients occurred, including both prior to and while on mechanical ventilation that may have an effect on the mortality endpoint in the trial.”

“These include extended management of patients prior to ventilator support, and use of experimental therapies such as dexamethasone, antivirals, and re-purposed immunomodulatory agents. All of these may have changed the natural course of ventilated patients and reduced overall mortality rates during the trial compared to the early stages of the pandemic,” it added.

What about the Novartis deal?

Readers may be aware that Mesoblast recently signed a deal with Novartis for remestemcel-L. That agreement will have an initial focus on the development of a treatment for acute respiratory distress syndrome (ARDS), including that associated with COVID-19.

It also sees Novartis pay US$50 million upfront and then upwards of US$1.25 billion in milestone payments.

This news appears to have led to concerns that this deal may now not go ahead.

Though, the release advises that “Mesoblast and Novartis will both analyse these results to identify meaningful clinical outcomes that may guide decisions on the development program for remestemcel-L in non-COVID ARDS.”

More reading

• Why Mesoblast, Pilbara Minerals, Pushpay, & Retail Food Group shares are dropping lower
• ASX 200 down 0.1%: APRA removes bank dividend restrictions, Fortescue slides, Zip higher
• Why the Mesoblast (ASX:MSB) share price is sinking 11% lower
• These are 8 of the best performing ASX healthcare shares of 2020 so far
• Which shares will benefit from trillions of dollars in new global stimulus?

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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The world’s largest companies have done pretty well for their shareholders this year, rapidly climbing out of the COVID-19 crash in March.

With interest rates at historic lows, and even negative in some countries, investors have flocked to park their money in shares.

And all that additional capital has pumped up the value of those stocks.

So much so that, this week, new research revealed the market capitalisation of the 10 largest publicly listed companies have reached 11.93% of the entire world’s gross domestic product.

The study, commissioned by Dutch financial comparison site Bankr, showed the 10 companies were worth US$10.06 trillion as of 13 December.

This compares to a COVID-adjusted global GDP of US$84.27 trillion.

Five US technology companies sit firmly at the top.

“The top 5 companies saw their stock soar in 2020 during the pandemic. The brands were used as a means of navigating the pandemic as most people opted for technology solutions to work remotely, learn, and keep entertained,” read the report.

“Due to the companies’ ability to offer solutions during the pandemic, their stock rallied, indicating a sign of investor confidence amid economic turmoil.”

Rank	Company	Market capitalisation (USD)
1	Apple Inc (NASDAQ: AAPL)	$2.09 trillion
2	Microsoft Corporation (NASDAQ: MSFT)	$1.59 trillion
3	Amazon.com Inc (NASDAQ: AMZN)	$1.55 trillion
4	Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)	$1.22 trillion
5	Facebook Inc (NASDAQ: FB)	$0.79 trillion
6	Alibaba Group Holding Ltd (NYSE: BABA)	$0.72 trillion
7	Tesla Inc (NASDAQ: TSLA)	$0.59 trillion
8	Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B)	$0.55 trillion
9	Visa Inc (NYSE: V)	$0.49 trillion
10	Taiwan Semiconductor Mfg. Co. Ltd (TPE: 2330)	$0.47 trillion
Source: Bankr; Table created by author

COVID-19’s impact on valuations 

As well as the growth in share prices, the report noted the virus itself had an effect in the massive valuations proportional to the planet’s GDP.

“The health crisis inflicted high and rising human costs worldwide, and the necessary protection measures severely impacted economic activity,” the report stated.

“As a result of the pandemic, the global economy contracted. When comparing growth, the overviewed companies have witnessed rapid growth, unlike the global economy.”

With emerging economies struggling to grow in the last few years, the dominance of massive multinationals predominantly from the US was a concern, according to the study.

“For example, Facebook’s plan to launch its currency has been met with objections. Additionally, some companies continue to invest more in political lobbying,” the Bankr report read.

“It will be interesting to see how this influence will impact their market capitalisation and the global GDP share.”

More reading

• Is it time for Facebook to do the unthinkable?
• Amazon stock: Buy, sell, or hold going into 2021?
• ACCC hauls Facebook to court for ‘deceptive’ conduct
• Tesla has a high-class problem
• With the high Aussie dollar, is now a good time to buy US shares?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Alphabet (A shares) and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alibaba Group Holding Ltd., Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Facebook, Microsoft, Tesla, and Visa and recommends the following options: long January 2022 $1920 calls on Amazon, short January 2022 $1940 calls on Amazon, long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short December 2020 $210 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), and Facebook. 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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Experts are predicting a big year for mergers and acquisitions (M&As) in 2021 and this is likely to impact on your ASX share investments.

Herbert Smith Freehills partner, Tony Damian, says he has never seen the M&A pipeline this full. And unlike previous years, his firm is not expecting any Christmas slowdown for dealmakers this year, reported the Australian Financial Review.

COVID could unleash M&A frenzy in 2021

You can thank or blame the COVID‐19 for this. The pandemic has created a number of tailwinds for takeovers, which will carry though well into next year.

“There’s a confidence around the boardroom table, people are getting on with things that they have been thinking about for some time,” Damian told the AFR.

“Boards are acutely conscious any decent asset will have a range of admirers – corporates, [private equity], pension funds, local super funds. The animal spirits of M&A are alive and kicking.”  

Cheap money only half the story

The economic meltdown caused by COVID unleashed a wall of money into the global financial system. Cash is so cheap and bountiful that we have an increasing number of dollars hunting for new homes.

This flood of liquidity is primarily credited for the rapid rebound in the S&P/ASX 200 Index (Index:^AXJO) and international share markets.

The other “benefit” from the pandemic is the nominalisation of working from home. It’s now acceptable for deals to be struck online and that means many bankers and advisors will be working from their beach houses over the festive break and beyond.

This increase in productivity could see more deals done. The AFR reported that we could see a record number of M&A transactions over the next 12 months.

ASX stocks in the M&A spotlight

As it stands, a number of ASX stocks are under the M&A spotlight. The Coca-Cola Amatil Ltd (ASX: CCL) share price, AMP Limited (ASX: AMP) share price and WPP Aunz Ltd (ASX: WPP) share price are just a few examples of companies fighting off takeover approaches.

There’s also speculation that the BlueScope Steel Limited (ASX: BSL) share price and the Boral Limited (ASX: BLD) share price may also see some corporate action in 2021.

Takeovers an extra tailwind for ASX value stocks

What’s perhaps more significant for ASX investors is that the potential M&A frenzy will feed the rotation into value stocks from growth.

ASX value stocks have only recently been outpacing ASX growth stocks and experts remain divided on whether this marks a real turnaround.

Value stocks tend to be those that have underperformed. These stocks are also the ones that attract the most interest from would be bidders.

Of course, one should never invest based on takeover speculation. But it’s always nice to know that some bidder might be lurking behind some attractively priced ASX stocks.

More reading

• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises on Thursday
• Leading broker just upgraded these ASX gold stocks to “buy”
• ASX stock of the day: Why are Netwealth (ASX:NWL) shares up 7%?
• Why the ASX 200 could be the Nasdaq of 2021

Motley Fool contributor Brendon Lau owns shares of AMP Limited and BlueScope Steel Limited. Connect with me on Twitter @brenlau.

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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The National Australia Bank Ltd (ASX: NAB) share price is dropping lower on the day of its annual general meeting.

In morning trade the banking giant’s shares are down 1% to $23.60.

For investors that are interested, I have picked out three key takeaways from the event. They are as follows:

~90% of customers are off COVID-19 loan deferrals

The bank’s CEO, Ross McEwan, revealed that around 90% of its customers that were on a COVID-related loan deferral are now getting back to normal.

He commented: “It is pleasing that around 90 per cent of customers who were on deferral are getting back on track with their payments.”

Though, Mr McEwan acknowledged that some customers are still struggling and the bank intends to support them.

“Despite the positive signs, some are not yet through the worst. We are resolute in helping them. In the past few weeks, I have written to 5.8 million customers, to personally outline this commitment. In almost all cases, what has happened during COVID-19 has not been their fault. Most will just need a bit more time to recover. But some customers’ situations have changed permanently. We will work with them to help them protect their equity. That’s the responsible thing to do,” he explained.

Growth opportunities lie ahead.

The chief executive is positive on NAB’s long term prospects and has set a clear plan for the bank to achieve a sustainable performance.

He explained: “While revenue headwinds from low credit growth and ultra-low interest rates remain, we see opportunities for growth in our core banking businesses; NAB, BNZ and UBank. As we lift performance, we expect to have the opportunity to return more profit to you, our shareholders.”

Dividend increases could be coming.

Mr McEwan accepts that many investors choose to invest in the banks for their dividends. Pleasingly, as alluded to above, he expects the bank to start paying a higher proportion of its earnings out to dividends again in the future.

“We are a dividend-paying stock and we will resume paying at higher levels when it’s right to do so. Achieving double-digit cash return on equity will be a key measure of our success. Cost and capital discipline are essential to delivering better returns. It is our responsibility to spend NAB shareholders’ money very carefully. I expect each and every dollar spent to be justifiable. That is my obligation and commitment to you,” the CEO said.

More reading

• Wilson Asset Management thinks these 2 ASX shares are a buy
• ASX stock of the day: Why are Netwealth (ASX:NWL) shares up 7%?
• NAB almost had $22m defrauded before man’s arrest
• Why the NAB (ASX:NAB) share price climbed higher today
• The Commonwealth Bank (ASX:CBA) share price is climbing higher today. Here’s why.

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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In morning trade the Paradigm Biopharmaceuticals Ltd (ASX: PAR) share price is climbing higher.

At the time of writing, the biopharmaceutical company’s shares are up 2% to $2.59.

Why is the Paradigm share price rising?

Investors have been buying the company’s shares this morning after it announced that it has received feedback from the US Food and Drug Administration (FDA). This is in relation to its Zilosul product for the treatment of osteoarthritis.

According to the release, having received the FDA’s feedback, the company can confirm that the same clinical trial protocol will be used in the USA, Europe and Australia. Management is optimistic that this has the potential to enable registrations in multiple jurisdictions, saving time and money.

However, in order to achieve regulatory harmonisation across the FDA and European Medicines Agency (EMA), Paradigm will increase the proposed number of clinical trial study participants in its osteoarthritis clinical program.

Investigational New Drug (IND) application.

Paradigm has also revealed that it is now finalising its IND for submission to the FDA in the first quarter of calendar year 2021.

It has already begun the planning and start-up phase for Zilosul and once the IND is open, clinical trial participants from the USA and Australia will be enrolled into its pivotal Phase 3 randomised double-blind, placebo controlled, multicentre, multinational clinical trial (PARA002).

PARA002 will firstly determine the minimally effective dose and then investigate the safety and efficacy of Zilosul in subjects with osteoarthritis.

Management aims to enrol the first patient for its clinical program in mid 2021. Based on this timetable, the company would expect top-line efficacy results in the first quarter of calendar year 2023.

Paradigm’s CEO and Interim Chairman, Paul Rennie, commented: “Paradigm is grateful to the US FDA for their feedback. Paradigm is confident that it has all the necessary information and clarity for a pivotal Phase 3 program to now make an IND application in Q1 CY 2021.”

“Paradigm has appointed its CRO in the USA and Australia. Paradigm can confirm preparatory work on its pivotal Phase 3 clinical trial has commenced but obviously no clinical trial subjects can be treated, with the investigational product (Zilosul), until the FDA IND is open,” he added.

More reading

• Paradigm (ASX:PAR) share price drops lower on trial update

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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The Viva Energy Group Ltd (ASX: VEA) share price will in the crosshairs when the ASX opens this morning, after it announced a weak, unaudited full year guidance for FY20.

The Viva Energy share price closed yesterday at $2.01.

Why the Viva Energy share price could move today

The Viva Energy share price will be on watch this morning after the company reported its full year underlying earnings before interest, tax, depreciation, and ammortisation (EBITDA) is expected to come in around $494 million to $524 million, down 21% from FY19.

This is expected to result in a net loss after tax for the company of between $17 million to $47 million, compared with a net profit of $135 million in FY19.

The weak numbers are a result of weak sales volumes in FY20, down 16% compared to FY19.

The company said its non-refining earnings are expected to perform strongly for the full year, up approximately 14% from FY19. 

Its refining earnings, however, been heavily impacted by weak regional refining margins, reduced production in response to lower Victorian market demand, and periods of higher crude premiums earlier in the year. 

The company’s refining earnings losses are expected to come in at between $83 million and $93 million, compared to positive earnings of $117 million in FY19.

Viva Energy also says that capital management has been a key focus, with $591.6 million returned to shareholders through a mix of capital return, dividends, and on market buybacks in FY20. 

Capital expenditure has also been closely managed and is expected to be approximately $70 million lower than the original guidance given at the beginning of the year. 

The company says it is committed to returning the remaining $100 million from the divestment of its stake in Viva Energy REIT (real estate investment trust) during FY21.

Viva Energy CEO Scott Wyatt remains upbeat, saying: 

The response to the COVID-19 pandemic has naturally had a significant impact on our business and our customers.

Overall, the company has performed well during 2020 given the difficult trading conditions. The Non- Refining businesses have delivered significant growth over the prior year, and while Group results have been impacted heavily by the global weakness in the refining sector.

More about Viva

Viva Energy was a recent recipient of the federal government’s subsidy for refiners. This will result in the company receiving a minimum of 1 cent per litre for the production of primary fuels at its Geelong refinery between 1 January and 1 July 2021.

The subsidy is part of Australia’s fuel security strategy, and is designed to protect the country’s refiners by improving the viability of the refining sector over the next ten years.

Viva Energy estimates the payment will contribute approximately $30 million to its underlying refining EBITDA for the six-month period.

About the Viva Energy share price

The Viva Energy share price has gained around 6% in value since the beginning of the year. 

Viva shares dropped by almost 40% in April, at the height of the pandemic before rebounding to today’s level.

The company commands a market capitalisation of $3.23 billion.

More reading

• Viva Energy (ASX:VEA) share price rising on $30 million fed package
• ASX 200 Weekly Wrap: ASX 200 hits a 6! Thank iron ore
• These were the best performing ASX 200 shares last week

Motley Fool contributor Eddy Sunarto 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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Despite improving investor sentiment since the 2020 stock market crash, the near-term prospects for many companies continue to be uncertain. Risks such as political challenges in Europe and the ongoing coronavirus pandemic could cause investor sentiment to come under pressure.

Furthermore, the stock market has always experienced downturns following its gains. As such, now could be the right time to start planning for a market decline through holding some cash and identifying potential buying opportunities that may become more attractively priced in the coming months.

The potential for a second stock market crash

This year’s stock market crash was caused by the impact of the coronavirus pandemic on the world economy’s outlook. Although investors may be feeling more optimistic about the economy’s prospects, a number of threats could hold back its performance in the near term. For example, Brexit may mean that investors are more risk averse due to it being an unprecedented event.

Furthermore, factors such as weak consumer confidence and a lack of investment from businesses that have struggled this year could mean that economic growth remains disappointing in the near term.

Another stock market crash is also likely to be experienced at some point in future because the track record of the stock market shows that it does not experience perpetual growth. Ultimately, an event is likely to take place that causes investor sentiment to weaken in response to the prospect of more challenging operating conditions for a range of businesses. Therefore, planning for such an occurrence in advance could allow an investor to take advantage of it.

Preparing for a market downturn

Clearly, it is extremely difficult to know when a stock market crash will occur. However, taking steps such as holding additional cash could be a sound move. This may enable an investor to react more quickly and decisively to temporary market declines that can rapidly be reversed. Cash savings may offer disappointing returns at the present time due to low interest rates. However, buying undervalued stocks in a market decline may mean superior long-term growth for patient investors.

Preparing for a market downturn may also involve assessing future buying opportunities. This may mean creating a watchlist, for example, of companies that have solid financial positions and wide economic moats. Waiting for their share prices to fall in a market decline can require a large amount of patience and discipline. However, it can be worth it if an investor is able to buy high-quality companies at low prices.

Certainly, planning for a stock market crash may mean there is an opportunity cost in the short run as share prices could move higher. However, it could be a sound strategy to use over the long run, as market cycles are likely to remain in place in the coming years.

More reading

• 2 outstanding ASX shares to buy and hold for a decade
• Here’s how ASX buy now, pay later (BNPL) shares have performed in 2020
• 2 ETFs offering strong international diversification
• Why the IOOF (ASX:IFL) share price is one to watch on Friday
• 27 ASX companies just got an unwanted knock on the door

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’re looking to follow in the footsteps of Warren Buffett and make some buy and hold investments, then you might want to take a look at the ASX shares listed below.

Here’s why they could be long term market beaters:

CSL Limited (ASX: CSL)

If you’re looking for a buy and hold option, then this biopharmaceutical giant could be one to consider. Its shares have been market beaters over the last decade and have been tipped by many to repeat these heroics over the next 10 years.

This is thanks to the quality therapies and vaccines it has in its portfolio, the increasing demand for immunoglobulins, its expanding plasma collection network, and its investment in research and development. The latter will see the company invest in the region of US$1 billion in these activities in FY 2021. It is because of these investments that CSL has a pipeline of potential treatments which have market opportunities in the billions.

Analysts at UBS recently looked through its pipeline and saw enough in it to put a buy rating and $346.00 price target on its shares. This compares to the current CSL share price of $288.16.

NEXTDC Ltd (ASX: NXT)

Another option to consider as a buy and hold investment could be NEXTDC. It is a technology company that provides innovative data centre outsourcing solutions, connectivity services, and infrastructure management software.

Due to the ongoing shift to the cloud, demand for data centre services is expected to increase materially over the coming decades. This puts NEXTDC in a fantastic position to profit. Particularly given its partner ecosystem, which hosts Australia’s largest independent network of carriers, cloud, and IT service providers.

The company is also in the process of looking at an expansion into Asia and has opened up offices in Singapore and Tokyo. If it can repeat its success in this market, its growth could continue for a long time to come.

Analysts at Goldman Sachs are positive on its future. Last month they put a buy rating and $13.20 price target on its shares. This compares to the current NEXTDC share price of $12.25.

More reading

• ASX healthcare shares could outperform in 2021: Fundie
• These are 8 of the best performing ASX healthcare shares of 2020 so far
• 2 ASX healthcare shares to buy for 2021 and beyond
• Why the Medical Developments International (ASX:MVP) share price is sinking lower
• These are 10 of the best performing ASX tech shares of 2020 so far

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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Were there any four letters hotter than B-N-P-L (buy now, pay later) on the ASX in 2020? I think not. BNPL shares have confounded and delighted ASX investors for years now. After a thunderous 2019 (and 2018, and 2017), many were predicting that the sector would blow off some steam in 2020 as investors eventually came back to Earth.

The opposite has occurred. Not only have some BNPL shares outperformed almost every other ASX share in the financials sector, but some have handily outperformed most ASX blue chips. Especially if you take their performances since the March share market crash. But some others haven’t, and instead delivered handy losses.

Let’s have a look:

ASX BNPL share	YTD share price gain (as of 17 December)	Market capitalisation
Afterpay Ltd (ASX: APT)	292.78%	$34.29 billion
Sezzle Inc (ASX: SZL)	289.76%	$657.34 million
Openpay Group Ltd  (ASX: OPY)	97.58%	$264.63 million
Splitit Ltd (ASX: SPT)	85.07%	$553.44 million
Zip Co Ltd (ASX: Z1P)	59.04%	$2.92 billion
Zebit Inc (ASX: ZBT)	(1.9%)	$97.24 million
Laybuy Holdings Ltd (ASX: LBY)	(35.37%)	$231.16 million
Humm Group Ltd (ASX: HUM)	(35.65%)	$576.99 million

Afterpay still sits on the BNPL throne

No surprises as to the king of this particular hill. BNPL pioneer and titan Afterpay comes in at the front of the pack so far for 2020. At the time of writing, the Afterpay share price has in fact just made a fresh new all-time high of $120.77, putting its year-to-date gains at almost 300% – an eye-watering sum on its own, but especially so if you consider that Afterpay also banked year-to-date gains of more than 100% in both 2018 and 2019 as well (close to 150% for the latter).

And here’s the real kicker: Afterpay shares plummeted all the way down to $8.01 at one point during the March share market crash. If you count the gains between 23 March and today, the Afterpay share price has returned 1,402%.

So what has gone so right for this company? Well, quite a lot, as it turns out.

Back in May, Afterpay announced that the Chinese gaming and e-commerce giant Tencent Holdings had acquired a 5% stake in the company. At the time, investors were a little worried that the coronavirus-induced recession would ‘pop the Afterpay bubble’ by eliciting a wave of payment delinquency. That, as it turns out, did not come to pass. But at the time, the Tencent move shored up a lot of confidence. Especially when Afterpay’s management said the deal would help the company expand into the Asian region.

Since then, it has only been onwards and upwards for Afterpay. The company announced some stunning growth numbers in its FY2020 earnings report, and later made inclusion into both the ASX 50 and the ASX 20 indexes. All of these factors have worked marvelously for sentiment surrounding Afterpay shares, and have likely been the driving factors behind the recent all-time highs.

Some other top performers

But it’s not just Afterpay that’s been doing well in 2020. Sezzle has also been a top performer. It claims the No. 2 spot on 2020’s BNPL gainers, but also outperforms even Afterpay since 23 March, giving investors a 1,749% gain to today.

We can probably thank raw growth for these gains. Just this month, Sezzle reported that underlying merchant sales for the month of November 2020 were 188.5% higher than November 2019.

Turning to Openpay and we have an interesting story. Yes, Openpay shares are up a more-than-respectable 97.58% for the year. However, the Openpay share price remains more than 50% below its 52-week high of $4.98 seen back in September. At that point, Openpay was up around 280% year to date. What happened? Well, it’s not clear. Openpay is still growing at a healthy clip. It recently reported record user growth and transactional volume across both October and November. Perhaps investors just decided they wanted Afterpay shares instead.

Split and Zip

We see a similar pattern with Splitit. The Splitit share price is also boasting healthy year-to-date gains on today’s prices. But it is also down around 33% from its 2020 high watermark. Again, we have seen some strong numbers out of the company recently. At the end of October, Splitit reported 214% year-on-year growth in sales volume, and a 318% increase in quarterly revenue over the prior corresponding period. It also touted some ambitious expansion plans over in the United States.

Turning now to Zip Co, the perpetual ‘bridesmaid’ of the BNPL shares. Zip’s successes have been a little more muted in 2020 than the companies we’ve discussed so far. And, like Openpay and Splitit, Zip shares are also quite a way from their own 52-week high. Back in September, the Zip share price hit $10.64, more than 40% away from its current share price.

With this company, investors were initially highly welcoming of Zip’s acquisition of the US-based QuadPay that was announced back in June. Zip’s subsequent trend lower can likely be put down to (again) investors preferring Afterpay, or perhaps as a result of some negative broker attention over the past few months.

Some not-so-impressive BNPL shares

Now to the losers of the group – Laybuy, Humm and Zebit.

Laybuy and Zebit both only had their initial public offerings (IPOs) in 2020, Zebit just back in October. The BNPL sector has attracted a lot of froth and volatility in 2020, as you’ve probably picked up. These kinds of IPOs tend to attract investors trying to make a quick buck, as it were. A similar pattern emerged with both companies’ floats: a spike, followed by net selling pressure.

Finally, let’s look at Humm (formerly known as FlexiGroup until last month), the wooden spoon recipient of the ASX’s BNPL shares. Humm has posted some unimpressive numbers in 2020, including a 62% drop in profits for FY2020 back in July, and has recently launched into the New Zealand market. However, its modest growth compared to its peers and a recent capital raise seems to have dimmed investors’ appreciation of this company. The Humm share price remains down by almost a third in 2020 so far.

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Sebastian Bowen 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 Humm Group Limited and Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Here’s how ASX buy now, pay later (BNPL) shares have performed in 2020 appeared first on The Motley Fool Australia.

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The two exchange-traded funds (ETFs) in this article offer diversification to investors.

What is an exchange traded fund?

In the above link is a breakdown of an ETF, but in summary it provides investors exposure to a group of assets or businesses through a single investment. You don’t have to go out and buy the 100, 500 or thousands of individual businesses yourself.

This would save a lot on brokerage and it also provides instant diversification. This diversification can supposedly lower risks because if there’s a problem with one business (or sector) then the exposure to the other businesses and sectors can mitigate that.

Here are two examples that could give you a lot of diversification:

Vanguard Msci Index International Shares ETF (ASX: VGS)

This ETF is about giving investors exposure to many of the world’s largest companies listed in major developed countries. It allows Aussies to participate in the long-term growth potential of international economies outside Australia.

It actually has a total of more than 1,500 holdings that are spread across many countries. Whilst the US makes up just over two thirds of the ETF’s portfolio, the following countries account for more than 0.5% each: Japan, the UK, France, Canada, Switzerland, Germany, the Netherlands, Sweden, Hong Kong, Italy, Denmark and Spain.

The biggest holdings are the ones that have the biggest influence on the ETF’s overall returns. At the end of November 2020 its biggest positions were: Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla, Johnson & Johnson, JPMorgan Chase, Visa and Proctor & Gamble.

Looking at the sector allocation, IT has the biggest exposure with 22.2%. There’s a 13.1% weighting to healthcare businesses, a 12.2% exposure to financials, a 12.2% weighting to consumer discretionary and a 10.8% position in industrials. The other sectors weightings are less than 10%.

Vanguard Msci Index International Shares ETF has an annual management fee of 0.18% per annum. Since inception in November 2014, its net returns per annum have been an average of 12.3%.

VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)

This ETF aims to give investors exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages, in other words ‘wide economic moats’, according to Morningstar’s equity research team.

The call on attractive valuation is based on the ETF targeting companies trading at attractive prices compared to Morningstar’s estimate of fair value.

VanEck Vectors Morningstar Wide Moat ETF has 48 holdings. The biggest 10 positions each have a weighting of at least 2.6%. Those largest exposures are: Applied Materials, Corteva, Charles Schwab, Microchip Technology, Boeing, Compass Minerals International, Aspen Technology, Yum! Brands, Cheniere Energy and American Express.

It has an annual management fee of 0.49% per annum. Over the past five years, the ETF’s average return per annum has been 16% – this has outperformed the S&P 500’s return of 13.6% over the same time period.

As the name suggests, the entire portfolio is invested in US shares, so there’s no diversification in terms of the country of listing, but each individual company will have its own percentage split of domestic and overseas earnings. The underlying earnings aren’t 100% American. 

In terms of sector allocations, the ones with a weighting of more than 10% in this ETF are: technology with a 22.2% allocation, healthcare with a 18.2% weighting, financials with a 17.1% holding, industrials with a 11.3% weighting and consumer staples with a 10.1% allocation.

More reading

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• 2 quality ETFs to buy for long-term investing

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF and Vanguard MSCI Index International Shares ETF. 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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