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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Following an incredible 2020 for Tesla Inc (NASDAQ: TSLA) stock, expectations were high going into the company’s fourth-quarter earnings report Wednesday afternoon. Investors in the growth stock were looking for another quarter of meaningful profits and signs that rapid sales growth can persist in 2021 and beyond.

The automaker arguably delivered. Free cash flow soared, management guided for vehicle deliveries to grow even faster in 2021 than they did in 2020, and the company unveiled an all-new Model S interior.

“This past year was transformative for Tesla,” management said in the company’s fourth-quarter update. “Despite unforeseen global challenges, we outpaced many trends seen elsewhere in the industry as we significantly increased volumes, profitability and cash generation.”

Here’s a close look at five of the most important metrics from the quarter.

1. Revenue growth of 46%

Fueled primarily by a 61% year-over-year increase in vehicle deliveries, Tesla’s fourth-quarter revenue jumped 46%, helping the company cap off a strong year. This put full-year revenue at $31.5 billion, up from $24.6 billion in 2019.

2. Free cash flow of $1.9 billion

Tesla’s free cash flow (cash provided by operations less capital expenditures) was $1.9 billion, up from $1 billion in the year-ago period. The company has “sufficient liquidity” to fund its “product roadmap, long-term capacity expansion plans and other expenses,” management said.

3. Installed energy storage capacity of 1,584 megawatt-hours

Tesla’s energy storage business has been growing sharply recently — and Q4 was no exception. Quarterly energy storage installations amounted to 1,584 megawatt-hours, up from 530 megawatt-hours in the year-ago quarter. Total 2020 megawatt-hour energy storage deployments were more than 3 gigawatt-hours, up 83% year over year.

4. An operating margin of 5.4%

Tesla’s fourth-quarter operating margin of 5.4% put its total 2020 operating margin at 6.3%, up from 0.3% in 2019. Management said it expects its operating margin to continue expanding, eventually reaching “industry-leading levels.”

5. An expected increase in vehicle deliveries of more than 50%

Tesla’s year-over-year growth of 36% in vehicle deliveries in 2020 was impressive. But 2021 will be even more notable, according to management’s projections. In the fourth-quarter update, Tesla said it expects vehicle deliveries to increase more than 50% year over year. This would put total 2021 deliveries at more than 750,000 — up from about 500,000 deliveries in 2020.

As if these metrics weren’t enough for Tesla shareholders to get excited about, Tesla also reiterated some important progress on its product plans. These include starting Model Y production at its Berlin and Texas factories, and launching Tesla Semi — both this year — along with an all-new interior design for Tesla’s Model S sedan.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Here are the US shares ASX investors are buying
• Will the blue sweep boost Tesla? Don’t count on it
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• The Tesla (NASDAQ:TSLA) earnings announcement is on the way
• Why Tesla (NASDAQ:TSLA) shares were last year’s worst short bet

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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At lunch on Thursday the S&P/ASX 200 Index (ASX: XJO) is a sea of red following a broad market selloff. At the time of writing, the benchmark index is down 2.3% to 6,625 points.

Here’s what is happening today:

Market selloff

The ASX 200 has followed the lead of Wall Street, which was sold off overnight amid some disappointing earnings results and concerns about high levels of speculative trading activity. Overnight the Dow Jones dropped 2.05%, the S&P 500 sank 2.6%, and the Nasdaq index tumbled 2.6%. Every single sector is in the red on the Australian share market at lunch.

Bank shares tumble

The banking sector has been hit hard by today’s selloff. All the big four banks are trading notably lower and weighing heavily on the ASX 200 index. The worst performer in the group has been the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price. Its shares are down 2.6% at the time of writing.

InvoCare jumps on GameStop fears

The InvoCare Limited (ASX: IVC) share price has been a surprisingly positive performer today. The funerals company’s shares were up as much as 10% at one stage today. This appears to have been driven by concerns that InvoCare could become the “GameStop” of the Australian share market. According to the AFR, Goldman Sachs named the company as the share most at risk of a short squeeze due to its high proportion of shares shorted compared with its average daily volume traded. Goldman notes that it would take 33 days to unwind all the shorts based on its average daily trading volume.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Thursday has been the Unibail-Rodamco-Westfield CDI (ASX: URW) share price with a 14% gain. This follows a sharp rise on its European listed shares overnight. The worst performer has been the IOOF Holdings Limited (ASX: IFL) share price with a 9% decline. This follows the release of a disappointing second quarter update.

More reading

• IOOF (ASX:IFL) share price on watch after second quarter update
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 falls 0.6%
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare 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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The OFX Group Ltd (ASX: OFX) share price is tiptoeing higher today following the release of its third-quarter trading update.

At the time of writing, the OFX share price is defying the weakening ASX market, reaching $1.20.

Q3 FY21 performance review

The OFX share price is moving in positive territory after investors digest the company’s latest results.

For the period ending December 31, the foreign exchange and money transfer company delivered fee and trading income (revenue) of $36.5 million. This represented a 10.2% increase compared to the last quarter and an 8.2% lift over the prior corresponding period (pcp).

Underpinning the result, corporate segment and online sellers saw growth of 17.9% and 9.9% over the pcp, respectively. This was despite consumer revenue, due to COVID-19 challenges, falling 3.6% from this time last year.

Overall, net operating income (NOI) for the business elevated to $32.3 million, up 4.2% over the comparable period. The sound performance was attributed to strong transaction volumes and higher Corporate Average Transaction Values (ATV). The company noted that the astronomical growth recorded in these segments may result in a lower NOI margin for FY21.

Transactions surged to 361,800, representing a 27.6% jump over Q3 FY20. OFX revealed that its higher-value clients traded more frequently with greater ATV’s. At a group level, ATV stood at $19,800 which is a 12.7% drop from the pcp, but an improvement on the prior quarter.

What did the CEO say?

OFX’s CEO, Mr. Skander Malcolm, reinforced the company’s achievement, saying:

In what has been one of the most uncertain periods for economies worldwide, the growth in revenue is testament to the high degree of client support. The recovery in Consumer client activity and further growth in Corporate revenue, gives us a great deal of confidence in the strength of the business for the remainder of the year and beyond.

Our growth investments also continue to deliver a more valuable business, with excellent new client activity in Corporate that will underpin future recurring revenue, a stronger and more global Online Sellers segment, and a growing Enterprise segment with a healthy pipeline.

OFX share price summary

The OFX share price has fallen more than 14% when looking at its 12-month chart. A steep drop in March due to COVID-19 brought the company’s shares to an all-time low of 90.5 cents. However, a quick rebound occurred, elevating its shares to near its 52-week highs of $1.54 achieved last January.

Nonetheless, the OFX share price has treaded lower more recently, stabilising around the $1.20 mark.

More reading

• ASX 200 down 2.3%: Bank shares tumble, InvoCare jumps, IOOF disappoints
• Here’s why GameStop stock skyrocketed more than 100% on Wednesday — and why it could be on the verge of collapse
• The Megaport (ASX:MP1) share price is down 25% since August
• Why the LiveTiles (ASX:LVT) share price is avoiding the market selloff
• Facebook beats the street thanks to stellar ad sales

Motley Fool contributor Aaron Teboneras 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Shares of GameStop Corp (NYSE: GME) extended their torrid recent gains on Wednesday as a horde of traders rushed to buy the video game company’s stock in attempt to crush short-sellers and drive its price to astronomical levels.

As of 1:25 p.m. EST, GameStop’s stock price was up a shocking 125%.

Yet the stock’s incredible rally could be nearing its end.

So what

GameStop’s shares are now up nearly 1,700% so far in 2021 — and it’s still January. An epic short squeeze is believed to be fueling the rally — one led by an army of individual traders that are using social media sites like Reddit and Twitter to coordinate their strikes against short-sellers.

By buying heavily shorted stocks en masse, these bear slayers are driving up their price. Short-sellers, in turn, are suffering staggering losses.

To stem the bleeding, many short-sellers — including multibillion-dollar hedge fund Melvin Capital — have been forced to exit their positions. This requires that they buy back the stock they sold short, which has likely helped to drive GameStop’s price even higher.

The short squeeze has even caught the attention of Tesla CEO Elon Musk and venture capitalist Chamath Palihapitiya. On Tuesday, Musk sent his 43 million Twitter followers a link to a popular Reddit message board that many traders have used to hype GameStop’s stock. Palihapitiya, meanwhile, went so far as to say on Twitter that he bought GameStop call options, which is essentially a leveraged bet that its stock price would continue to rise.

Now what

While no doubt amusing to Musk, Palihapitiya, and the legion of GameStop bulls who have enjoyed the stock’s incredible ascent, the steep rally in its share price might not last much longer.

On Wednesday, Bank of America analyst Curtis Nagle reiterated his underperform rating on GameStop’s shares. He expects GameStop’s upcoming earnings report to remind investors of the company’s formidable challenges, including the shift to digital game downloads and the enormous pressure this will place on its preowned and collectibles businesses. Thus, Nagle argues that the game retailer’s share price could plunge as much as 97% to $10.

With so much potential downside, those who have profited from GameStop’s ascent may want to consider taking profits. And investors who haven’t yet purchased shares will likely be best served by staying well clear of GameStop’s stock.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Chamath Palihapitiya jumps on the GameStop bandwagon
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla and Twitter. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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It’s been a topsy-turvy year for shareholders in ASX cloud networking company Megaport Limited (ASX:MP1).

After crashing to a low of $6.11 back in March 2020, the tech company became an unlikely success story during COVID-19. Increased demand for its networking services from companies forced to work remotely during lockdowns drove its share price to a new record high of $17.67 by late August.

However, over the last few months, the Megaport share price has again slid lower, dropping more than 25% to $13.10 as at the time of writing.

What does Megaport do?

Megaport develops customisable “on-demand” network services to corporate clients. It leverages cloud technology to help clients expand their network connectivity beyond the limits of traditional infrastructure. It also gives companies the flexibility to manage their bandwidth usage.

Customers have the ability to scale up their bandwidth requirements when demands are high, and then reduce consumption during off-peak times. This allows companies to be more efficient with their data usage, cutting operational costs.

It’s a pretty nifty service for companies trying to adapt to the new and unique demands of COVID-19 lockdowns, and so it’s no wonder that 2020 turned into a breakout year for Megaport.

The company reported a year-on-year revenue uplift of 66% to $58 million in FY20. And, after executing two successful capital raisings during the year, Megaport ended the financial year with a cash position nearing $170 million, giving it a solid platform to pursue future growth opportunities.

Recent news out of the company

In its December quarter cash flow report, released to the market on 19 January 2021, Megaport recorded quarterly revenues of $18.7 million, an uplift of 8% over the prior quarter. The company also reported its first ever quarter of positive net cash flow from operations.

Megaport did caution that it expects some one-off annual payments later in the year may mean net cash flow from operations will dip into negative territory again this year, but it anticipates this to be positive on a recurring basis from FY22 onwards.

The company is also planning to launch its “Megaport Virtual Edge” over the next 6 months. This gives customers the ability to connect to Megaport’s ecosystem from anywhere in the world. This allows companies to create their own file sharing networks, and exchange data between clients, fellow staff and other offices securely and easily.

FY21 outlook

Megaport hasn’t provided any firm revenue targets for FY21. However the company has identified a key goal of achieving breakeven earnings before interest, tax, depreciation and amortisation (EBITDA) on an exit run rate basis by the end of FY21. Based on the current Megaport share price, the company has a market capitalisation of $2 billion.

More reading

• Why Aussie Broadband, Fisher & Paykel Healthcare, Lynas, & Megaport are charging higher
• Megaport (ASX:MP1) share price jumps 7% on broker upgrade
• Why Megaport, Netwealth, PointsBet, & Zip shares are racing higher
• 5 things to watch on the ASX 200 on Thursday
• Top brokers name 3 ASX shares to buy today

Rhys Brock owns shares of MEGAPORT FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT 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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The LiveTiles Ltd (ASX: LVT) share price has avoided the market selloff and is trading flat this morning.

At the time of writing, the workplace software provider’s shares are fetching 21 cents.

Why is the LiveTiles share price avoiding the sell off?

LiveTiles appears to have escaped the market selloff today after investors responded relatively positively to its second quarter update.

According to the release, as of the end of December, LiveTiles’ annualised recurring revenue (ARR) had increased 10.2% year on year to $58.1 million. 

This growth would have been stronger had it not been for the foreign exchange headwinds. In constant currency, LiveTiles’ ARR would have grown 23% year on year to $64.7 million.

Management advised that this was driven by a small rise in customer numbers to 1,132 and an increase in average ARR per customer. The latter is now $57,245 per customer in constant currency, up 12% from this time last year. On a reported basis, the average ARR stood at $51,329.

Based on this, the company notes that its Customer Lifetime Value metric has reached $403 million.

Also growing nicely were its cash receipts. LiveTiles reported record quarterly cash receipts of $13 million. This was up 25% on the prior corresponding period and limited its net operating cash outflow to $2.7 million. The latter is a 56% improvement on the corresponding period last year.

Management commentary

LiveTiles Co-Founder and Chief Executive Officer, Karl Redenbach, commented: “We are pleased again with our overall Q2 results, achieving for the first time $13m in cash receipts in a single quarter. Our annualised recurring revenue (ARR) continues to grow every quarter and has now risen to $64.7m, a 200% increase over the last 2 years.”

Looking ahead, Mr Redenbach appears positive on the company’s growth prospects.

He explained: “Our sales pipeline continues to show accelerated growth from both direct and partner sales channels, with a large portion of the pipeline growth generated from our recently launched new product suites such as LiveTiles Reach, as companies around the world look to implement COVID-19 re-opening strategies by embracing digital workplace solutions.”

 “We’re confident LiveTiles products will continue to gain traction and our growth will continue to accelerate with it,” he concluded.

More reading

• What’s in store for the ASX tech sector in 2021?
• How to invest in ASX shares in a post-COVID world 

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 LIVETILES FPO. The Motley Fool Australia has recommended LIVETILES 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Social media giant Facebook Inc (NASDAQ: FB) posted solid fourth-quarter 2020 results on Wednesday evening. The company exceeded Wall Street’s expectations across the board and boosted its share buyback program by $25 billion.

Facebook’s revenue rose 33% year over year, landing at $28.1 billion. GAAP earnings jumped 52% to $3.88 per diluted share. The average analyst had been forecasting earnings of roughly $3.19 per share on sales near $26.3 billion.  

The company achieved its stated goal of accelerating its ad revenue growth, lifting that key metric from 22% in the third quarter to 31% this time. Free cash flow rose 91% to $9.22 billion.

The company’s active user counts continued their steady climb at low-teen to mid-teen percentage rates year over year. Facebook had 1.84 billion daily active users in December.

CFO David Wehner highlighted two macroeconomic trends that helped the company exceed expectations in the quarter. A global shift toward online commerce was accompanied by higher consumer demand for products and lower interest in services. These two tendencies combined to serve as a tailwind to Facebook’s advertising growth.

Looking ahead, Wehner said he expects easy year-over-year comparisons in the first half of 2021 as the company will be measuring its progress against the weak advertising environment that prevailed during the early stages of the coronavirus pandemic.

Encouraged by these results and current business trends, Facebook refueled its share repurchase program with a $25 billion injection. The previous authorisation of $34 billion had $8.6 billion left, so the move brings Facebook’s capacity to buy back its shares to roughly $34 billion again.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• Experts want Big Tech to stop the spread of COVID-19 misinformation
• Amazon’s ad business will dominate the 2020s
• 3 biggest risks to ASX share investors right now
• Here are the US shares ASX investors are buying
• Signal share price? An Elon Musk tweet and a WhatsApp controversy

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. Anders Bylund has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Strategic Elements Ltd (ASX: SOR) share price is off to the races again in morning trading today. Shares are currently up 13% after leaping 16% higher on open.

This is a great start, particularly on a morning where the All Ordinaries Index (ASX: XAO) is falling hard, down 2%.

Strategic Elements’ gains come following the company’s latest progress report on its novel battery ink technology.

What did Strategic Elements report on its battery ink project?

In an announcement to the ASX this morning, Strategic Elements revealed another big step forward with its self-charging battery project.

The battery pack is a prototype with several connected battery ink cells. It uses moisture from the air to generate an output of over 4 volts for around 5 hours. The batteries can also generate electricity from the humidity from your skin surface.

Strategic Elements said that additional work would be done to test its battery ink cells. Testing with different loads and different humidity levels will be performed.

The project is being developed in collaboration with the University of New south Wales and CSIRO. The Federal Government has also given partial funding for the project.

The company reported that a patent application covering aspects of its work was filed yesterday, 27 January.

In a forward looking statement, Strategic Elements revealed the battery ink cells could potentially be made up to 4 times smaller while still generating 0.8V of electricity. The development of these smaller cells is expected to be conducted over the next 4 to 6 weeks.

In the next 6 to 8 weeks, the company also plans to develop a prototype of Battery Ink cells it can fabricate onto flexible textile material.

Words from the Managing Director

Commenting on the latest progress, Strategic Elements Managing Director Charles Murphy said:

We are obviously very encouraged with the milestones being achieved by UNSW and the team. In response that that we are adding in PhD material science expertise and developing a panel of industry specialists. The technology sits across two of the strongest 2021 investment sectors in batteries and environmental technologies and is a very good fit for our high-risk, high reward Pooled Development Fund Structure.

UNSW Professor Dewei Chu added, “Although still under development the battery ink is developing promisingly as an electrical generator battery technology.”

Strategic Elements share price snapshot

Strategic Elements operates as a venture builder, generating projects by combining teams of leading scientists and innovators. The company operates as a registered Pooled Development Fund (PDF). Notably, investors in Strategic Elements do not pay capital gains taxes. This is compensation for the added risk of investing in small and medium sized companies under the Federal Government PDF program.

It’s been a great New Year for investors in Strategic Elements to date.

With the 13% intraday gains taken on board, the Strategic Elements share price is up 233% since the opening bell on 4 January. Shares are up a whopping 906% over the past 12 months.

More reading

• Zip and Vulcan were among the most traded ASX shares last week
• Why the Strategic Elements (ASX:SOR) share price is rocketing 36% higher today
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• Why the Strategic Elements (ASX:SOR) share price rocketed 39% higher today

Motley Fool contributor Bernd Struben 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 ELMO Software Ltd (ASX: ELO) share price has been caught up in the market selloff on Thursday and is tumbling lower despite the release of a solid second quarter update.

At the time of writing, the cloud-based HR and payroll platform provider’s shares are down 5.5% to $6.61.

How did ELMO perform in the second quarter?

ELMO continued its strong form in the second quarter of FY 2021 thanks to a combination of organic growth and the benefits of the Breathe and Webexpenses acquisitions. The latter have contributed their own recurring revenues and provided the company with cross-selling opportunities.

For the three months ended 31 December, ELMO reported a 22.1% increase in cash receipts to a record $18.8 million. This brought its cash receipts for the first half to $34.4 million.

Statutory revenue for the half came in at $30.6 million, which was up 29.3% on the first half of FY 2020. This led to the company’s annualised recurring revenue (ARR) increasing 42.8% over the prior corresponding period to $74.2 million.

At the end of the half, ELMO was well capitalised with a cash balance of $71.4 million.

Laying the foundations of growth

ELMO’s Chief Executive Officer, Danny Lessem, was pleased with the half and believes the company has laid the foundations of growth.

He commented: “We have had a strong first half in FY21 with the highest half year cash collection in ELMO’s history. The first half of FY21 was an important investment period for the business as we laid the foundation for high levels of organic growth with entry into the small business market segment and expansion into expense management.”

“The acquisition of Breathe, a UK-based scalable self-service HR platform, has provided entry to the small business market in Australia, New Zealand and the UK and typically services customers with less than 50 employees. This segment represents an addressable market of c$2.2bn and pleasingly we have already seen the UK customer base grow in the past few months.”

“The acquisition of WebExpenses, a UK based expense management platform, in late December has not only expended ELMO’s wide convergent solution, it also accelerates ELMO’s UK midmarket expansion by facilitating the cross sell of ELMO modules to existing Webexpenses customers. The expense management segment represents a new addressable market of c$1.4bn,” he concluded.

Outlook

ELMO has reaffirmed its guidance for FY 2021.

It continues to expect ARR in the range of $81.5 million to $88.5 million, revenue of $65 million to $71 million, and an operating loss of $2.4 million to $7.4 million.

More reading

• 2 exciting mid cap ASX shares to buy and hold
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• What’s in store for the ASX tech sector in 2021?
• 2 explosive ASX tech shares to buy in January
• 2 quality ASX growth 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. recommends Elmo Software. The Motley Fool Australia owns shares of and has recommended Elmo Software. 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’s best to avoid diving into entire stock sectors, regions or styles this year, according to one international fund manager.

Investors have just endured a 2020 dominated by crazy unpredictable events, according to Fidelity International director Tom Stevenson.

“The year was dominated by the mother of all ‘unknown unknowns’,” he wrote on Livewire.

“The pandemic was a black swan, left field, out of the blue surprise to us all.”

Fortunately, a sharp recovery since March provided some relief.

“A terrible year in so many ways turned out to be a lot kinder to investors than perhaps we deserved,” said Stevenson.

“If someone had told us in March that many stock markets would end the year well ahead of where they had started, we would have taken it.”

But despite the lucky escape, investors have again thrown money into the market like 2021 will be a predictable year only consisting of “known knowns”.

Stevenson suspects this will burn many people.

“There remain more unknowns than knowns to my mind. And this will make it difficult to manage our investments this year,” he said.

“Relying on the big market narratives that have driven returns in recent years looks risky. It feels like a year in which the micro will matter more than the macro. Stock-picking will determine success or failure more than making the big calls.”

Now you actually have to be smart

Stevenson’s advice to pick individual stocks in 2021 is a call for a more selective attitude than the past decade.

“For many years – and the pandemic did nothing to change this – investment success has reflected three binary decisions,” he said.

“Being in the right sector: technology, not banks or energy. Picking the right style: growth not value. And being in the right place: if you had a big enough exposure to the US, the rest of your regional allocation didn’t matter much.”

The UK investment executive advised the rise of technology shares would continue and it’s fair enough to pay a premium. But in 2021 you actually have to pick “tomorrow’s winners”, rather than gambling indiscriminately.

“As the digital revolution continues, governments look to build back better after the pandemic and the decarbonisation of the world gathers pace, there will be winners to spot and losers to avoid,” he said.

“So, looking into 2021, I see less benefit to be gained from placing big bets and more from the harder graft of picking the best stocks across sectors, styles and regions.”

Structural winners protect against unknown unknowns

Stevenson’s stance matches Australian fund manager Jun Bei Liu’s advice last week to seek out growth shares that will be “structural winners”.

The portfolio manager at Tribeca Investment Partners told a GSFM briefing that company earnings had been on a downward spiral for 10 years before COVID-19.

“It’s been declining for many, many decades. So the structural winners will always command a premium,” she said.

“My view is that a portfolio will always have to have structural winners – because they will future-proof your portfolio.”

She said a small increase in interest rates will not damage those companies that are benefitting from a fundamental shift in society or consumption.

“It is still at a 3-decade low… And we don’t see that interest rate escalating to anything more meaningful in the next few years.”

Stevenson warned investors to be ready for anything in 2021.

“We can only brace ourselves for the unknown unknowns that inevitably lie ahead.”

More reading

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Motley Fool contributor Tony Yoo 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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