One area that has been performing well this year is the tech sector. You only need to look at the chart in this article to see that.

Given the quality on offer in the sector, it’s no surprise that investors are keen to have some exposure to it.

But which tech shares should you buy? Two tech shares that have been rated as buys are listed below:

Jumbo Interactive (ASX: JIN)

Jumbo Interactive is an online lottery ticket seller and the operator of the Oz Lotteries website. While this website is easily the biggest contributor of revenue at present, this looks set to change in the future.

The company’s Powered by Jumbo SaaS business is expected to be the key driver of growth over the 2020s. This business is in a strong position to benefit from the shift online of lotteries globally. Management estimates that it has a US$303 billion global total addressable market, with just 7% of this market online at the moment.

One broker that is positive on the company is Morgan Stanley. It has an overweight rating and $14.30 price target on the company’s shares.

Nearmap Ltd (ASX: NEA)

Nearmap is a leading aerial imagery technology and location data company which has operations in both the ANZ and North American markets.

It has experienced strong demand for its services in both markets over the last few years, leading to impressive growth in its key Annualised Contract Value (ACV) metric. While the pandemic has put a dampener on things, the future remains very positive. Thanks to the quality of its offering, favourable industry tailwinds, and the launch of new products, management is aiming to grow its ACV by between 20% to 40% per annum over the medium term.

Morgan Stanley is also a fan of Nearmap. It currently has an overweight rating and $3.10 price target on its shares.

More reading

• 3 exciting ASX tech shares to buy in 2021
• 5 things to watch on the ASX 200 on Tuesday
• 10 highly rated ASX shares to buy in 2021
• 2 ASX growth shares to buy for big returns in 2021
• Why Abacus, Emerge Gaming, Jumbo, & Woodside shares are dropping lower

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 Nearmap Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Nearmap 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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As both US and Australian shares have climbed into the stratosphere since the March COVID-19 crash, a fierce debate has continued.

Are stocks overvalued?

This question is asked most of growth shares. The successful ones now have market capitalisations that are incredible multiples of their actual financial numbers.

For example, Tesla Inc (NASDAQ: TSLA) is now trading at a mind-blowing 1,377 price-to-earnings (P/E) ratio. The S&P 500 Index (SP: .INX) generally has a ratio of 42.08.

If this doesn’t mean much to you, consider this. Tesla is now worth as much as the 8 biggest petrol-car producers in the world.

In Australia, Afterpay Ltd (ASX: APT) shareholders have been laughing this year but the company doesn’t even have a P/E ratio — because its earnings are negative.

It’s now worth more than Coles Group Ltd (ASX: COL). Are we seriously believing people are using buy now, pay later more than buying groceries?

Why are investors willing to plough so much money into companies with such inflated valuations? 

Isn’t it risky? Won’t the bubble burst when everyone realises they’ve made a big mistake?

Why markets aren’t as risky as P/E ratios suggest

Monash Investors principal Simon Shields has a very simple explanation as to why it’s not as risky as it seems.

“I have yet to see anyone consider risk when comparing the high prices of today with the lower prices of yester-year,” he said on Livewire.

“Investing in stocks was riskier 30 years ago, much riskier 60 years ago, and riskier still 90+ years ago.”

How has investing in shares become safer in modern times? 

Shields attributes the shift to the many checks and balances that have been introduced over the decades.

“Over that time, the world has become a much safer place in which to buy stocks. Investors are better educated. Companies disclose more information and accounts are more reliable. Security regulators and legislators have closed loopholes and reduced the opportunity for fraud,” he said.

“Calculators and then computers have improved analysis. Technology has allowed everyone from investors, to companies, to regulators to make better-informed decisions, and so be less likely to be surprised. Central banks and governments have become much more risk averse.”

This may help explain why investors are willing to pay such high prices for companies they think have bright futures.

Growth shares are not as cyclical these days

Shields also pointed out that the very nature of growth stocks have changed in the past couple of decades.

“In the past, a lot of the growth achieved by growth companies was cyclical (as shown in the consumer discretionary, media, building materials, or transport sectors),” he said.

“When the economy slowed or went into a recession, companies in these cyclical sectors saw earnings forecasts pulled back much more than those for the less cyclically exposed value stocks.”

But since the internet boom in the 1990s, structural growth started to take precedence over cyclical growth.

“It used to be that ‘tech’ stocks were a distinct and small market sector. But new and better ways of doing things have spread rapidly across many industries with the penetration of smartphones, Web 2.0 and cloud computing,” Shields said.

“Structural growth now is a greater proportion of the market’s overall growth outlook, and it is at the expense of many mature low growth companies.”

Examples of structural growth include consumers moving from physical to online retailers and shifting from owning items to pay-as-you-use (eg Uber Technologies Inc (NYSE: UBER)).

With the onset of the coronavirus pandemic, even travel has been structurally changed with video conferencing and work-from-home becoming the norm.

Structural growth is more stable, giving investors more confidence to throw money at these businesses.

“These structural trends are playing out regardless of the economy’s cycle,” said Shields.

“[This] means the growth companies’ forecasts are less susceptible to cyclical disappointment, while at the same time they cause the value companies’ forecasts to weaken.”

More reading

• New BNPL enters ASX: How it promises to be different
• US “mum and pop” investors leaving the pros in the dust in 2020 stock rally
• What will happen when Tesla (NASDAQ:TSLA) joins the S&P 500 today?
• The most crazy ASX chart of 2020
• Here’s how rich Afterpay (ASX:APT) shares have made shareholders

Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Uber Technologies. The Motley Fool Australia owns shares of AFTERPAY T FPO and COLESGROUP DEF SET. 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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There are some ASX shares that are growing really fast and could be worth watching.

Some businesses have the potential to deliver market-beating returns if they’re growing a lot faster than other companies.

Here are two businesses where the revenue and profit is rising rapidly:

Bapcor Ltd (ASX: BAP)

Bapcor is the largest auto parts business in Australia and New Zealand.

The ASX share recently released a trading update as its FY21 half-year result gets closer.

For the financial year to date to the end of November, Bapcor’s overall revenue was up around 26%. The leadership explained that it is achieving operating leverage from lower expenses in areas such as travel and other areas of discretionary expenditure, as well as lower interest rates and the contribution from Truckline (an acquisition) which was not included in the prior corresponding period.

For the FY21 interim report, Bapcor is expecting to achieve revenue growth of at least 25% over the prior corresponding period in the previous year, with net profit after tax (NPAT) likely to grow by at least 50% compared to the prior corresponding period.

Darryl Abotomey, the Bapcor CEO and managing director, said: “We are very pleased with the strong performance of Bapcor’s businesses. Trade and wholesale represent over 80% of Bapcor’s business, with retail at approximately 20%. Historically, trade focussed businesses perform solidly in difficult economic conditions – which is again borne out of Bapcor’s current performance.”

The ASX share also said that the construction of the new Victorian distribution centre is progressing well. The company said this is an exciting development that will deliver significant operational benefits.

Fund manager WAM Research Limited (ASX: WAX), which holds Bapcor, said that the ASX share has benefited from an increase in domestic travel, reduced usage of public transport and increased second-hand car sales. WAM said that Bapcor has a strong balance sheet and the fund manager believes the company is well placed to make earnings-accretive acquisitions.

At the current Bapcor share price, it’s valued at 19x FY23’s estimated earnings.

Redbubble Ltd (ASX: RBL)

Redbubble is an ASX share that operates two of the largest online websites for selling artist-produced goods. Those websites are Redbubble.com and TeePublic.com. There are various product categories sold through the websites including bags, housewares, clothes, stationery and wall art.

In the first quarter of FY21, Redbubble generated marketplace revenue growth of 116% to $147.5 million. This drove gross profit higher by 149% to $64.5 million. In the quarter it also generated $22.1 million of earnings before interest and tax (EBIT) and $27.1 million of operating cash. It only made $10.2 million of operating cashflow in the prior corresponding period.

At the time of the trading update, Redbubble CEO Martin Hosking said: “The strategic priority for the group now is to ensure we extend the market leadership we have established. We intend to invest in the customer experience to improve loyalty and retention and ensure long-term higher levels of growth. The company has the resources to undertake the anticipated investments and the margin structure to ensure it can do so while remaining profitable.”

Joseph Kim from Montgomery Investment Management said that Redbubble has been one of the clear winners from the shift to online. However, whilst the ASX share has clearly been a “stay-at-home” trade, the fundie believes the business has the opportunity to emerge a longer-term structural winner from COVID-19 if it can capitalise in the recent spike in user and customer interest as a result of recent lockdown measures.

More reading

• The most crazy ASX chart of 2020
• The Bapcor (ASX:BAP) share price just got upgraded again
• Top brokers name 3 ASX shares to buy next week
• 4 leading ASX growth shares to buy for 2021
• Why Bapcor, Fortescue, Nufarm, & Saracen shares are pushing higher

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Bapcor. 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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Yet another buy now, pay later provider is listing on the ASX this week – but the company promises it’s different to the rest.

Payright Limited (ASX: PYR) will start trading 11am AEDT on Wednesday after selling out its initial public offering (IPO) at $1.20 per share. The business will float with a market capitalisation of about $107 million.

The fintech will make it on to the bourse just before a quiet time over Christmas.

The Motley Fool spoke to co-founder and executive officer Myles Redward, who said the stock market was currently welcoming of new entrants.

“There’s a lot of positive sentiment, particularly for our sector buy now, pay later,” he said.

“It really was a case of trying to capitalise on that sentiment. Take advantage of the stock prices we’re seeing more broadly.”

Who can blame him. 

Afterpay Ltd (ASX: APT) shares are up 270% so far this year, and more than 1,335% since the March COVID-19 crash. Zip Co Ltd (ASX: Z1P) is up 48% year-to-date and more than 340% since its March trough.

How Payright is different to other BNPL

According to Redward, his business’ main moat is that it targets a different consumer compared to most other BNPL providers.

“If you look at most of the micro-ticket buy now, pay later providers, we’re talking sub-$1,000. Typically have average transaction sizes ranging from $150 to $500,” he said.

“For us, our average transaction size is about $3,000.”

So rather than clothing or small appliances, Payright users are paying for home renovations, health and beauty, or even higher education fees.

In fact, education contributes 34.1% of the gross merchant value that runs through the Payright system – the highest of any sector.

“Being a higher price point, it lends itself to a wider range of industry types, more diversified.”

To mitigate the risk of lending out bigger amounts of money, Payright does have to be more discriminating about the end users it lends to.

“We do put our applicants through a more robust credit assessment process,” Redward told The Motley Fool.

“So we do credit checks through Equifax Inc (NYSE: EFX), we consider a range of stability and capacity type measures and inputs… We ID-verify to safe harbour standards.”

Payright’s post-IPO plans

The IPO was set to raise $10 million or up to $20 million if it was oversubscribed.

Payright ended up landing $18.5 million. Combined with a pre-IPO capital raising round a few weeks ago, it now has $25 million to play with.

The money will be spent on sales and marketing, product development and technology – all in the name of growth, according to Redward.

“The reason we’re doing the IPO is to really accelerate and turbo-charge that growth over and above what we’ve been able to achieve.”

Revenue did rise close to 190% for the 2020 financial year compared to 2019, but it was coming off a low base. The business made a $8 million net loss off a turnover of $9.85 million for the year ending 30 June.

Australia remains the priority market, although its nascent New Zealand operations have just reopened after pausing during the first COVID-19 outbreak.

More reading

• The most crazy ASX chart of 2020
• Here’s how rich Afterpay (ASX:APT) shares have made shareholders
• ASX 200 Weekly Wrap: ASX hits new post-March high
• Top brokers name 3 ASX shares to buy next week
• How useful is the P/E ratio in assessing ASX shares?

Tony Yoo owns shares of AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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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With the interest rates on offer from traditional interest-bearing assets at record lows, it certainly is a tough time to be an income investor.

But don’t worry because the Australian share market is home to a large number of dividend shares with far better yields. Two to take a closer look at are listed below:

Fortescue Metals Group Limited (ASX: FMG)

If you’re looking for very large yields and don’t mind investing in the resources sector, then Fortescue could be worth a look. It is one of the world’s leading iron ore producers and boasts some of the lowest costs in the industry.

At present Fortescue is pulling iron ore out of the ground with a C1 cost of just US$12.74 per wet metric tonne. This compares to the current iron ore price of US$155.64 per tonne. So with Fortescue on course to deliver record shipments in FY 2021, it is well-placed to record another bumper full year result.

One broker that is expecting this to be the case is Macquarie. The broker is forecasting a very generous dividend payment in FY 2021 of approximately $2.61 per share fully franked. Based on the current Fortescue share price, this equates to a massive 10.9% dividend yield.

Westpac Banking Corp (ASX: WBC)

Although the big four banks have rallied hard in recent months, they still offer investors potentially generous dividend yields now that APRA is allowing unrestricted dividend payments in 2021.

Especially given improving house prices and Australia’s solid economic recovery from the pandemic. This could put the banks in a position to deliver modest growth in the coming years and reward shareholders for their patience.

In respect to Westpac, analysts at UBS are forecasting a $1.00 per share dividend in FY 2021 and then a $1.20 per share dividend in FY 2022. Based on the current Westpac share price, this represents fully franked ~5% and 5.9% dividend yields, respectively.

More reading

• ASX 200 Weekly Wrap: ASX hits new post-March high
• 2 ASX dividend shares with 4%+ yields
• How useful is the P/E ratio in assessing ASX shares?
• Why Bapcor, Fortescue, Nufarm, & Saracen shares are pushing higher
• Why the IOOF (ASX:IFL) share price is one to watch on Friday

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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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On Monday the City Chic Collective Ltd (ASX: CCX) share price was in sensational form.

The fashion retailer’s shares surged 11% higher to $3.52.

Why did the City Chic share price surge higher?

Investors were buying the company’s shares after it announced a binding asset purchase agreement to acquire UK-based women’s plus-size clothing retailer Evans for 23.1 million pounds (A$41 million).

Evans is a UK-based retailer of women’s plus-size clothing with a longstanding customer base and strong market position. The Evans assets will be acquired from the Arcadia group, which entered into administration on 30 November.

Management notes that the acquisition provides the company with a platform to launch into a new market worth 5 billion pounds per annum at present.

Is it too late to buy City Chic shares?

According to a note out of Goldman Sachs, its analysts don’t believe it is too late to invest.

This morning the broker reiterated its buy rating and lifted its price target on the company’s shares to $4.25.

Goldman Sachs was pleased with its acquisition of Evans and believes the acquisition will have a positive impact on its business.

The broker commented: “We estimate that the acquisition price implies a 6.0x FY22 EBITDA, vs. 2.2x FY21 EBITDA paid for Avenue in the US and is broadly in line with what CCX would have had to pay to acquire Catherines but arguably delivers greater strategic benefits: (1) immediate scale in the UK, (2) strong platform for cross-selling Avenue and City Chic product, and (3) retaining a strong balance sheet that will not constrain CCX’s ability to invest in future organic and/or inorganic growth.”

“We raise our FY21E/FY22E/FY23E EPS by 4-16% based on revenue growth assumptions of 5-10% for Evans and EBITDA margins to achieve 15% by FY23E. Our 12m TP moves to A$4.25 (from A$3.90). As this offers a potential return of 21%, we retain our Buy rating,” it concluded.

More reading

• Here’s why this fundie thinks City Chic (ASX:CCX) is an attractive ASX share
• Why City Chic, Kogan, Next Science, & NIB shares are charging higher
• Why the City Chic (ASX:CCX) share price is rocketing 15% higher

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 Australian share market may have been out of form on Monday, but that didn’t stop the Nanosonics Ltd (ASX: NAN) share price from continuing its positive run.

In fact, the infection prevention company’s shares climbed to a new record high of $7.95.

When it hit that level, it meant the Nanosonics share price was up 25% year to date.

But perhaps even more impressive, is that it has gained 54% since the start of November.

Why is the Nanosonics share price at a record high?

Investors have been buying the company’s shares over the last couple months amid a big improvement in its performance.

In its business update at the start of November, management revealed that the company has continued to grow the footprint of its trophon product during the first four months of FY 2021. It advised that the number of new trophon units installed globally was up 16% during the period.

This was supported by growth in the sales of the consumables that the trophon system uses. Unit purchases of consumables by end customers in the first four months of FY 2021 were up 4% compared with prior corresponding period and 25% compared with the last four months of FY 2020.

This update went down well with analysts at UBS, who put a buy rating and $7.20 price target on its shares following the update.

Though, after rocketing 38% higher since that broker note was released, the Nanosonics share price is now trading well ahead UBS’ price target.

What else is driving its shares higher?

As with many shares, the prospect of effective vaccines being rolled out imminently has given its shares a boost.

Nanosonics struggled to gain access to hospitals in FY 2020 because of the pandemic. This appears to have made it harder to close deals and put a dampener on its growth.

However, once vaccines are rolled out, access should be significantly easier. And given the increasing importance of infection prevention, investors appear to be betting that demand for its products could strengthen.

This will make Nanosonics one to watch in 2021.

More reading

• These are 8 of the best performing ASX healthcare shares of 2020 so far
• 2 ASX healthcare shares to buy for 2021 and beyond
• 10 highly rated ASX shares to buy in 2021
• 2 quality mid cap ASX shares to buy in December
• 10 fantastic ASX shares to buy in December

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 Nanosonics Limited. The Motley Fool Australia has recommended Nanosonics 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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On Monday the S&P/ASX 200 Index (ASX: XJO) started the week in a subdued manner and recorded a small decline. The benchmark index fell a few points to 6,669.9 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 expected to fall.

The Australian share market looks set to drop lower on Tuesday. According to the latest SPI futures, the ASX 200 is poised to open the day 26 points or 0.4% lower this morning. This follows a mixed start to the week on Wall Street. In late trade the Dow Jones is up 0.25%, the S&P 500 is down 0.35%, and the Nasdaq has fallen 0.2%.

AGL Energy rated neutral

The AGL Energy Limited (ASX: AGL) share price sank lower on Monday after downgrading its guidance for FY 2021. One leading broker that isn’t rushing in to buy shares is Goldman Sachs. Its analysts have retained their neutral rating and cut the price target on the energy company’s shares to $14.10. On Monday AGL downgraded its net profit after tax guidance from $560 million-$660 million to $500 million-$580 million. This represents an 11% reduction at the midpoint.

Oil prices sink lower.

Energy producers including Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Limited (ASX: WPL) could come under pressure today after oil prices sank lower. According to Bloomberg, the WTI crude oil price is down 2.8% to US$47.73 a barrel and the Brent crude oil price has fallen 2.8% to US$50.81 a barrel. A new COVID-19 strain has fuelled demand concerns.

Gold price softens.

Gold miners such as Newcrest Mining Limited (ASX: NCM) and St Barbara Ltd (ASX: SBM) could come under pressure after the gold price softened. According to CNBC, the spot gold price has fallen 0.3% to US$1,883.50 an ounce.

Pfizer COVID-19 vaccine approved in Europe.

The European Medicines Agency has authorised the Pfizer COVID-19 vaccine in people ages 16 and older. In light of this, Europe is on track to start vaccinations within a week. According to CNBC, vaccine authorisations are picking up pace on the continent just as countries tighten their lockdowns amid a deadlier winter wave of infections.

More reading

• ASX 200 ends slightly down
• Why the Medibank (ASX:MPL) has surged 4% higher today
• Why the AGL (ASX:AGL) share price has fallen 6% today
• What will happen when Tesla (NASDAQ:TSLA) joins the S&P 500 today?
• Under attack! Why the WiseTech Global (ASX:WTC) share price is down 9%

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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Retail investors in the US are shaping up to be better stock pickers than the professionals during the COVID‐19 rebound this year.

These mum and dad investors have generated returns that are twice that of hedge funds, according to Reuters.

I believe everyday ASX investors in Australia are also beating the pros at their own game. As reported in July, retail investors here have rushed to buy embattled ASX stocks during the COVID market meltdown.

It appears that US retail investors have done the same – turning the idiom “fools rush in where angels fear to tread” on its head!

I’ll tell you why this is significant later in this piece.

Stocks most popular with retail investors in 2020

Online trading platforms showed that the US stocks most popular with retail investors have performed much better than the overall market.

These stocks include the likes of the Amazon.com, Inc. (NASDAQ: AMZN) share price and Tesla Inc (NASDAQ: TSLA).

Reuters said that a basket of 58 US stocks popular with retail investors have surged 80% this year.

This compares to a 14.5% rise in the S&P 500 Index (INDEXSP: .INX) and a 40% return from hedge funds run by some of the brightest minds in the financial sector.

In Australia, our equivalent to Amazon and Tesla is the Afterpay Ltd (ASX: APT) share price. I suspect retail investors have been snapping up the stock more so than fund managers.

2020 is the year for “fools”

Perversely, it may be the lack of so-called “sophistication” that allowed retail investors to race ahead of the pros. These amateurs don’t believe in diversification and have a portfolio that’s concentrated in a few stocks that have led the rebound.

They were also less worried about controlling and managing risks. On the other hand, professionals have been cautious about pumping capital into a falling market earlier this year.

Retail investors beating pros to starting line

You can blame central banks for this. Retail investors have thrown caution into the wind when their savings are attracting close to zero returns. Other safe investment options are also underperforming when interest rates are at rock bottom and central bankers are flooding financial markets with cash.

This leaves retail investors few options and they are the ones diving head first into equities when the pros were still working out how deep the waters were.

Double, double toil and trouble

Some are drawing comparisons with the dotcom crash of 2000 as retail investors don’t seem to mind buying stocks that experts think are overpriced.

The “hot” US retail stocks of 2020 are trading on negative price-earnings multiples on average because many don’t make a profit, added Reuters.

“Of course it’s a bubble,” Mark Taylor, a sales trader at Mirabaud Securities, told Reuters.

“But money is free, liquidity is high, it’s never been easier to trade for retail punters, there’s no savings rate or bond yield and everyone wants the bubble to pop.”

Retail investors in winners circle

Sceptics waiting for the day of reckoning may need to exercise patience. The rebound in global economic growth as vaccines become available means that share markets are likely to keep rallying in 2021.

This is likely to force fund managers and other professionals left behind by retail investors to play catch-up quick.

Otherwise, they risk underperforming for a second year running and face uncomfortable questions from irate clients.

More reading

• What will happen when Tesla (NASDAQ:TSLA) joins the S&P 500 today?
• How to invest in US shares in 2021
• Better buy: Amazon vs Chewy
• Amazon has a new strategy to capture India’s e-commerce market
• World’s 10 biggest companies are now worth 12% of Earth’s GDP

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors.

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia has recommended Amazon. 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 year 2020 has not been kind to the transport sector, with some of the biggest names biting the bitter pill in a year that’s been lost to the coronavirus pandemic.

Airlines and airports have naturally been hit hard this year. However, there are also some transport shares that have done well in 2020.

Let’s take a look at the top 3 winners and losers in ASX transport shares in 2020.

First, the losers…

Company	1-year share price return	Current share price	Market cap
1. Qantas Airways Limited (ASX: QAN)	-33%	$4.89	$9.2 billion
2. Sydney Airport Holdings Pty Ltd (ASX: SYD)	-28%	$6.35	$17.2 billion
3. Aurizon Holdings Ltd (ASX: AZJ)	-25%	$4.04	$7.47 billion

Qantas Airways

The national carrier’s share price has seen some volatility this year, being pushed up and down at the slightest news on the virus outbreak.

The Qantas share price lost 33% this year, after losing 70% in March and dropping to its 52-week low of $2.03. The share started to pick up in November after news of successful vaccine testing was announced to the market.

Light is starting to appear at the end of the tunnel however, with the airline saying last week that its budget offshoot Jetstar will already exceed pre-COVID volume of flights within 3 months.

Although international leisure travel may still be months away, the airline revealed that its domestic capacity was already at 68% of pre-COVID levels for December, rising to nearly 80% for quarter-three.

Qantas delivered underlying profit before tax (NPAT) of $124 million for full year FY20, down 91% from FY19.

Sydney Airport

The Sydney Airport story in 2020 has pretty much followed the fate of Qantas. 

The airport’s shares had fallen by 50% in March, before recovering as economic outlook progressively improved in the second half of the year.

The company revealed that for the month of November 2020, it saw total passenger numbers decline by 90.6% to 350,000.

Sydney Airport has suspended dividend payments for the first time ever in its history, after reporting a $51.8 million net loss after tax, compared to a profit after tax of $200 million in the corresponding 2019 period.

The airport’s shares will certainly be one to watch in 2021 when the economy and travel are expected to be back to normal.

Aurizon 

Aurizon is not perhaps covered tremendously in the media. After all, it’s a rail freight operator company.

However, the company is a large juggernaut, transporting more than 250 million tonnes of Australian commodities – connecting miners, primary producers, and industry with international and domestic markets.

The Aurizon share price has lost a bit of shine this year, losing 25% in value as commodities exports dwindle in the face of the pandemic. Near term headwinds will come in the face of the continuing Australia-China political spat, as Australian coal has apparently been added to Beijing’s ban list.

Given the tough market, the company actually delivered an impressive full year FY20 NPAT of $531 million, up from $473 million the previous year.

And now for the winners….

Here are the top 3 performing ASX transport shares in 2020. The winners have been dominated by small cap shares, with the airlines Rex leading the charge.

Company	1-year share price return	Current share price	Market cap
1. Regional Express Holdings Ltd (ASX: REX)	+64%	$1.965	$212.6 million
2.Alliance Aviation Services Ltd (ASX: AQZ)	+65%	$4.04	$646.6 million
3.Wiseway Group Ltd (ASX: WWG)	+15%	$0.22	$32.2 million

Rex Airlines

The Rex share price has gained 64% in 2020, with 25% made in the past month alone.

Rex has been a favourite for investors recently, after it announced that it will break out of its regional roots and start servicing the “golden triangle” route. 

The Golden Triangle refers to the Sydney-Melbourne-Brisbane routes – among the busiest in the world.

The airline was brought to its knees back in March as passenger numbers plummeted 90%. Rex subsequently announced a loss after tax of $19.4 million on a turnover of $321.8 million for financial year 2020.

Alliance Aviation

The Alliance Aviation share price has performed brilliantly in 2020, gaining 54% and reaching its all-time high of $4.08 on 18 December.

Why has the company performed solidly this year while other airlines floundered?

First, Alliance generates income by providing contract, charter and allied aviation services to the mining and energy industry, both locally and internationally. The company actually delivered a profit before tax of $47.7 million in FY20 (+24.1% compared to the previous year).

Unlike other aviation and airport businesses, Alliance Aviation provides aviation services to mainly iron ore, gold, copper and uranium sectors, with the commodities industry representing 53% of its total contract value in FY20. As some of these exports have maintained their strong demand this year, so has demand for Alliance’s services.

Wiseway Group

You can’t blame yourself for not having heard about this company.

Wiseway describes itself as “one of the leading forward freight companies in Australia”, offering “extensive high-quality services for the whole Australia wide and globally”.

The company services all aspects of international forwarding and logistics, including air freight, sea freight, customs clearance, transportation, warehousing, distribution, and logistics solutions.

The Wiseway share price has gained 15% this year, with revenues up 53% to $31 million for the first quarter of Fy21. This was up $10.7 million from the prior corresponding period.

The $31 million in revenue for FY2021 so far compares favourably with the total revenue of $102.6 million that the company banked in the entirety of FY2020.

More reading

• ASX 200 ends slightly down
• ASX 200 down 0.4%: NIB jumps, a2 Milk rebounds, WiseTech sinks lower
• ASX 200 Weekly Wrap: ASX hits new post-March high
• 3 recovery ASX shares to buy for 2021
• 2 ASX dividend shares for 2021’s zero interest rate world

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Aurizon Holdings 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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