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This is the season many investors will be looking at punting on the worst performing ASX stocks of the year in the belief that most will stage a turnaround in 2021.

It’s a tradition made popular by the “Dogs of Dow” theory, although adopting this strategy for the ASX is fraught with danger.

But there is a way to minimise the risk and get this seasonal phenomenon working in your favour.

What drives the Dogs of Dow

Before I get into that, it’s important to know why this strategy can work in the US but not necessarily here.

For those who are unfamiliar with the Dogs of Dow, it’s driven by the belief that businesses work in cycles. So if a stock on the Dow Jones Industrial Average (INDEXDJX: .DJI) slumps in one year, there’s every chance it will turnaround in the new year.

History has shown that this investment method can work most of the time on average, but the theory doesn’t translate so well on the ASX.

Why Dogs of Dow doesn’t work as well for the ASX 200

The most obvious reason is size. The Dow Jones consist of some of the largest companies in the world and have been selected as they shape the US economy. The total market cap of the Dow Jones is US$8.33 trillion ($10.9 trillion).

In contrast, the total market cap of the S&P/ASX 200 Index (Index:^AXJO) is a mere $1.7 trillion.

The other point to note is that the Dow Jones has only 30 stocks. It’s easy to buy all the underperformers. If you tried that with the ASX 200, you will need deep pockets as you will need to buy many more.

You could use the ASX 20, but that’s dominated by banks and mining stocks. There just isn’t quite the same diversification as stocks on the Dow.

Should you still buy 2020 ASX dogs?

But this doesn’t mean you shouldn’t be looking at the dogs of 2020 on the ASX 200. One way this strategy could work for ASX investors is to be far more discerning when picking these laggards.

I’ve screened the biggest stragglers from this year against consensus broker recommendations provided by Thomson Reuters.

Here are a few 2020 dogs on in the top 200 index that brokers are urging you to buy today.

ASX underperformers that brokers are urging you to buy

One stock that stands out is the Downer EDI Limited (ASX: DOW) share price. Shares in the construction services group shed nearly a third of its value this year.

But consensus favours the stock as its leveraged to the booming pipeline of infrastructure construction projects.

Another worth watching is the Nufarm Ltd (ASX: NUF) share price, which lost a quarter of its value in 2020.

Profit misses and droughts have dragged on the seed and fertiliser group over the past year, but the weather outlook is looking bright for 2021.

Further, there are signs that its new omega oil enriched canola seed product is catching on. This innovation is promising to be a medium-term profit driver for Nufarm.

Finally, there’s the Telstra Corporation Ltd (ASX: TLS) share price. The value of our largest telco shrunk by more than 17% in 2020 but most brokers are backing it for 2021.

Its dividend appears to be sustainable, and that’s worth a lot in this zero-rate environment.

While this dividend may be under threat if Telstra tries buying for the NBN, this really isn’t such a bad thing. It’s short-term dividend pain for a longer-term growth lever – if Telstra can get it.

More reading

• Is the surging Bitcoin an existential threat to ASX gold miners?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%
• Key risks and rewards for ASX share investors heading into 2021
• 2020 was good for investors, will 2021 be even better?

Motley Fool contributor Brendon Lau owns shares of Nufarm Limited and Telstra Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Telstra 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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Universal Biosensors Inc. (ASX: UBI) shares are on the run today. This comes as the company’s Canadian subsidiary signed a new deal. The news has sent the Universal share price 4.5% higher to 46 cents.

What’s driving the Universal share price higher?

The Universal share price is surging higher today after the medical diagnostics company announced its Canadian subsidiary, Hemostasis Reference Laboratory Inc (HRL), has signed a new deal with Bayer AG.

HRL provides laboratory testing services in the areas of coagulation. The company performs clinical trials, research studies, and compound analysis, as well as validation testing on equipment. HRL assists global diagnostic manufacturers, pharmaceutical and clinical researchers, and contract research organisations.

According to its release, Universal advised that the agreement will see its laboratory business provide specific services to Bayer, “relating to the performances of laboratory analysis of biological samples.”

Management did not state the length of the contract, but did say it will be for an agreed period of time. HRL estimates the new partnership will generate CAD$1.3 million in additional revenue.

What did the CEO say?

Universal CEO Mr John Sharman commented on the strategic partnership, saying:

HRL is our laboratory service business in Canada and is an important asset in our blood testing business. We are looking to grow HRL and expand the client base over time. The contract with Bayer is a significant first step and we expect to be in a position to announce additional contracts with other customers over the course of the next six months.

How has the Universal share price performed in 2020?

This Universal share price has had a stellar year, gaining close to 150% over the past 12 months. The company’s shares fell to an all-time low of 13 cents in March, before quickly rebounding.

Earlier this month, the Universal share price reached a multi-year high of 50 cents after the company announced its distribution agreement with Grapeworks.

Based on current share price levels, the company commands a market capitalisation of around $78 million.

More reading

• Why the Universal Biosensors (ASX:UBI) share price is up 5% today
• Why the Universal (ASX:UBI) share price reached a multi-year high today

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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The PlaySide Studios Limited (ASX: PLY) share price has been a strong performer since completing its initial public offering (IPO) earlier this month.

Since landing on the ASX boards with a listing price of 20 cents, the video game developer’s shares have doubled to 40 cents today.

The PlaySide Studios IPO.

Earlier this month, PlaySide Studios raised $15 million from investors at 20 cents per share. Management revealed that that the IPO received strong support from a broad range of institutional and retail investors.

Upon listing, the company had approximately 366.5 million shares on issue, giving it a market capitalisation of $73 million based on the IPO price.

Given the doubling of its share price since then, its market capitalisation is now ~$150 million.

What is PlaySide Studios?

PlaySide Studios is one of Australia’s largest independent video game developers.

At the last count, the company had 52 titles developed across four platforms: Mobile, Virtual Reality (VR), Augmented Reality (AR), and PC.

This includes games that have been developed internally with original intellectual property (IP) and games developed in partnership with Hollywood studios such as Disney, Warner Bros, and Nickelodeon.

Among its titles are games related to Jumanji, The Walking Dead, Batman, Superman, Teenage Mutant Ninja Turtles, and Disney Pixar’s Cars.

The company operates in a growing mobile games market which it estimates to be worth $77.2 billion per annum at present.

What’s next?

With the company’s operations well-funded following its IPO, management is now aiming to secure the rights to develop mobile games from select media brands within its Brands & Licensing Division. It is also aiming to expand its development team to support new original titles.

In addition, the Port Melbourne-based company plans to open a business development office in Los Angeles when the risk from the COVID-19 can be appropriately managed. This is expected to support its activities with Hollywood studios.

The company’s Managing Director, CEO, and Co-Founder, Gerry Sakkas, appears very positive on the future.

Upon listing, Mr Sakkas commented: “PlaySide has in the past few years proven its ability to make games that millions of people love to play while sustainably building a profitable business on a global stage and, having now listed on the ASX, we believe we’ll be able to scale our skills, science and art to unlock significant value for PlaySide shareholders.”

More reading

• 3 recents ASX IPOs to watch
• Experts pick the best ASX IPO of 2020
• PlaySide Studios (ASX:PLY) share price doubles on ASX debut

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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At lunch on Wednesday the S&P/ASX 200 Index (ASX: XJO) has followed the lead of U.S. markets and is dropping lower. The benchmark index is currently down 0.8% to 6,644.4 points.

Here’s what has been happening on the market today:

Bank shares drop lower.

The big four banks are giving back Tuesday’s gains and are weighing on the ASX 200 today. While all the banks are trading lower, the worst performer in the group is the Australia and New Zealand Banking GrpLtd (ASX: ANZ) share price. The bank’s shares are currently down 1%.

Tech shares under pressure.

The shares of Afterpay Ltd (ASX: APT) and Altium Limited (ASX: ALU) are out of form on Wednesday and are trading notably lower. This has led to the  S&P ASX All Technology Index (ASX: XTX) losing 1.3% of its value today. Investors have been selling tech shares after a pullback on the technology-focused Nasdaq index overnight. The famous index recorded a 0.4% decline on Tuesday night.

Property shares tumble.

The property sector is under pressure today and is a sea of red. However, this is largely down to a large group of property shares trading ex-dividend this morning for their next payouts. Among the companies trading ex-dividend are the likes of BWP Trust (ASX: BWP), Charter Hall Group (ASX: CHC), and DEXUS Property Group (ASX: DXS).

Best and worst ASX 200 performers.

The best performer on the ASX 200 on Wednesday has been the Sims Ltd (ASX: SGM) share price with a 2% gain on no news. The worst performer has been the Growthpoint Properties Australia Ltd (ASX: GOZ) share price with a 4% decline. This morning the property company’s shares traded ex-dividend for its upcoming 10 cents per share interim dividend. This will be paid to eligible shareholders on 26 February.

More reading

• What’s in store for the Afterpay (ASX:APT) share price in 2021? 
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%
• Leading brokers name 3 ASX shares to buy today
• ASX 200 up 0.65%: Big four banks rise, tech shares charge higher, Flight Centre jumps

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 and recommends Altium. 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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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.

Tesla (NASDAQ: TSLA) shares hit a record $695 per share last week, briefly vaulting its market cap to over $650 billion. Since then, it has given back some of those gains.

Earlier this year, another very well-known tech company blasted past a $650 billion market cap — and never looked back. I’m talking about Facebook (NASDAQ: FB), the world’s biggest social media company.

Both Facebook and Tesla are part of the NYSE FANG+ index, which tracks 10 highly traded tech giants, including Alphabet and NVIDIA. And with Tesla joining Facebook in the S&P 500, millions of index fund investors now own a slice of both companies — whether they like it or not.

The parallels pretty much end there, though. And from an investment perspective, Facebook is easily the better bet now. 

Facebook has a sticky business model

Tesla operates in a competitive industry with many players — whether we’re talking about electric vehicles or the auto industry as a whole. Most car buyers aren’t as brand loyal as your typical Tesla owner. The typical car buyer is also a bit more price-sensitive when choosing a vehicle — which partially explains why Tesla’s had to cut prices to stay competitive.

Unlike Tesla and the auto industry, Facebook dominates the social media sphere, with 3.2 billion monthly active users across its Facebook, Instagram, Messenger, and WhatsApp apps. In 2019, seven out of every 10 global internet users — estimated at 4 billion — were on a Facebook app.

With so many people already use Facebook, potential new users are drawn to be where everyone else is already congregating and are less inclined to choose a competing service. For existing users, deleting Facebook means potentially instantly losing networks of connections they have built up over years. What’s more, users have filled up their Facebook and Instagram pages with photos, posts, and videos. It would be hard to move all this content away from Facebook.

Facebook has become, for many, more than just a social app — it’s a huge part of everyday life. It gives users access to the latest news, thousands of games and videos, and marketplaces for buyers and sellers. For those who aren’t happy with Facebook, there’s pretty much nowhere to go. 

As practically everyone’s on Facebook, companies are spending a big part of their ad and marketing budgets to reach the social network’s users. In the U.S., for example, eMarketer estimates that Facebook gets 23 cents of every dollar spent on digital advertising. As a result, Facebook’s revenue has almost quadrupled from 2015 to 2019.

This dominance has created issues for Facebook. For one, regulators are trying to make sure Facebook doesn’t abuse its dominant position. There are increasing calls from critics to break up the company by forcing it to divest its Instagram and WhatsApp apps. Even if Facebook isn’t broken up, its cost of doing business will inevitably rise in the long term. As the company grows, public pressure will force Facebook to take on more responsibility as a corporate citizen.

But these risks are just part and parcel of doing business. For now, the attractiveness of Facebook’s business model continues to far outweigh its challenges.

It is trading at a better price tag

Not only is Facebook the better business here, but its stock is also trading at a more palatable price.

Facebook’s already profitable. The company generates significant free cash flow every quarter, racking up a strong balance sheet, with $56 billion in cash and no debt. In contrast, Tesla has been losing money for just about its entire existence as it builds its business. It’s still dependent on external capital infusion to maintain operations. Tesla has been on the verge of bankruptcy before, prompting founder Elon Musk to shop the company on different occasions to buyers.

An evaluation of the financials suggests that Facebook should be trading at a higher valuation, especially given the strength of its business model and its ability to generate copious amounts of cash. But the reality is far from rational. Facebook trades at a price-to-sales ratio of 10 times trailing revenue while Tesla trades at over 20 times trailing revenue. 

Granted, a double-digit price-to-sales multiple doesn’t suggest Facebook is a screaming buy. But compared to Tesla, Facebook’s price is definitely more attractive, especially considering the company’s profitability and rock-solid financial position.

What this means for long-term investors

Even in a challenging 2020, Facebook generated revenue growth of 22% in the third quarter. That’s more impressive when you consider that many companies scaled back their advertising spend this year.

There are signs Facebook’s brightest years lie ahead. Facebook’s global average revenue per user has room to grow as it sits at $7.90, compared to $36.30 for U.S. and Canadian users. In particular, monetizing Instagram and WhatsApp could be a key driver of growth.

Facebook stock has rallied over 100% after hitting a 52-week low point in March, while Tesla is up over 690% year to date. In the short term, both stocks face the risk of a correction. 

But Facebook’s investors are probably sleeping better at night. After all, the company’s track record and long-term prospects make it a safer and better bet than Tesla — which, for all the hype, still has much to prove.

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

More reading

• FAANG stocks make their case to lead the Nasdaq in 2021
• Report: authorities rejected Facebook offer to foster competitors’ growth
• 10 incredible quotes that sum up investing in 2020
• Tesla asked Apple to buy it
• Is Apple (NASDAQ:AAPL) about to launch an electric car?

Lawrence Nga has no position in any of the stocks mentioned. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook and Tesla. 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.

The post Forget Tesla. Facebook is a better buy now appeared first on The Motley Fool Australia.

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

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Cooper Energy Ltd. (ASX: COE) shares have fallen lower in morning trade. At the time of writing, the Cooper Energy share price is trading 1.35% lower at 36.5 cents after the company released an update on its Sole Gas Sales Agreements (GSAs) this morning.

What did the company report?

The Cooper Energy share price is edging lower despite the company confirming its remaining Sole GSAs will commence on 1 January. Cooper Energy reported its long-term GSAs with industrial and utility clients in 2021 total 19.75 petajoules (PJ) in annual contract quantity. Its take-or-pay obligations represent a minimum quantity of roughly 90% of the total annual contracted volume.

The company said most Sole gas will now sell for the agreed term contract prices. Before the commencement of these remaining GSAs, Sole gas was selling for lower spot prices, less transportation costs. Cooper Energy and APA Group (ASX: APA) were sharing the revenue and costs, in accordance with their transition agreement.

APA Group operates the Orbost Gas Processing Plant, where Sole gas is processed. Performance at the plant has been hindered due to foaming of the sulphur recovery unit’s absorbers. Earlier this month, the company reported reconfiguration of the plant’s two absorbers, enabling them to operate independently, was complete. It is still analysing the root cause of the foaming issues.

Cooper Energy said it has backup gas supply arrangements in place to ensure supply to the GSAs.

Commenting on the progress, Cooper Energy managing director David Maxwell said:

The commencement of the Sole GSAs is a significant milestone which will deliver a material step-change in production, revenue, cash flow and earnings. We are pleased to be increasing gas supply to our utility and industrial customers and providing a competitive new source of natural gas to the domestic market. We are grateful for the strong support shown by our customers during what has been a longer than expected commissioning phase for the Orbost Gas Processing Plant.

Cooper Energy share price and company snapshot

Cooper Energy is an energy exploration and production company. It generates revenue from gas supply to south-east Australia as well as the production of low-cost Cooper Basin oil.

It’s been a difficult year for the company’s shareholders, who watched the Cooper Energy share price drop 41% in the wider COVID-19 market selloff earlier this year. And with the company reporting a 150% decline in underlying net profit after tax (NPAT) for the full 2020 financial year, the rest of the year wasn’t much better.

Year to date, the Cooper Energy share price is down 39%.

By comparison the All Ordinaries Index (ASX: XAO) is up 1.4% in 2020.

More reading

• 4 rock-solid ASX dividend shares to buy for 2021
• ASX 200 rises 0.7% on Wednesday
• Here’s what these popular ASX dividend shares plan to pay investors in 2021
• 3 ASX shares that keep growing their dividends every year
• These 2 companies join the ASX 200 next week

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

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The market may be sinking lower today, but that hasn’t stopped the Strategic Elements Ltd (ASX: SOR) share price from rocketing higher.

In morning trade, the technology-focused investment and development company’s shares are up a massive 39% to a record high of 23 cents.

Why is the Strategic Elements share price rocketing higher?

Investors have been buying the company’s shares this morning following the release of an announcement relating to its printable Nanocube Memory technology.

According to the release, testing has confirmed that the printable Nanocube Memory technology has potential as printable brain-inspired (neuromorphic) computing hardware.

Management explained that work at the University of New South Wales (UNSW) has confirmed that the Nanocube Memory structure and operation allows it to combine computing and memory in one place in a way similar to how biological neurons operate.

Why is this important?

The company notes that experts in the memory technology sector believe the future of computing will be about rethinking processor architecture from the ground up to emulate how a brain efficiently processes information.

The artificial synapses fabricated by UNSW using the Nanocube Memory technology provides a potential hardware solution that has combined data storage and processing abilities, a key to neuromorphic computing.

In addition, the technology has the potential to store a range of values (as resistance states), rather than just traditional ones and zeros. This allows it to mimic the way the strength of a connection between two biological synapses can vary. It notes that changing those synaptic weights (connection strength) in artificial synapses in neuromorphic computing is one way to allow the brain-based system to achieve self-learning.

How was it tested?

The release explains that “in order to test the artificial synapses fabricated using the Nanocube Memory technology for synaptic plasticity, a memristor device was fabricated and subjected to consecutive positive and negative current-voltage (I-V) sweeps which showed incremental decrease in resistance of the memristor device with positive voltage sweeps and incremental increase in resistance of the memristor device with negative voltage sweeps.“

The company advised that this shows the core synaptic function of synaptic plasticity of the memristor technology.

“Next, when electrical signals are applied to a biological synapse, the connection strength between neurons can be excited (potentiation) or inhibited (depression) which can be interpreted as the memorizing and forgetting behaviour of the human brain.”

What’s next?

Further early-stage work on features such as stability, potentiation, depression, latency, and power requirements will continue and be reported in the first quarter 2021.

The company also revealed that it is very pleased with progress of its printable self-recharging battery technology and remains on track to announce further information in January.

More reading

• Why the Strategic Elements (ASX:SOR) share price rocketed 9% higher today

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 Webjet Limited (ASX: WEB) share price has had an incredibly volatile year.

On Wednesday the online travel agent’s shares are changing hands for $5.24, which means they are down 45% since the start of the year.

However, this is a big improvement from the Webjet share price’s April low of just $2.25.

Why is the Webjet share price down 45% in 2020?

Investors were selling off Webjet and fellow travel shares such as Flight Centre Travel Group Ltd (ASX: FLT) and Qantas Airways Limited (ASX: QAN) earlier this year after the COVID-19 pandemic brought the global travel industry to a standstill.

With booking volumes dropping to previously unthinkable levels, Webjet and its peers were suddenly left with next to no income and significant costs to pay.

This led to Webjet having to raise funds to boost its balance sheet and help it navigate the crisis.

The company raised $346 million from institutional and retail investors through the issue of ~203.5 million shares at a price of $1.70 per new share. This was a sizeable 55% discount to its last close price at the time and highly dilutive to existing shareholders.

How is Webjet performing now?

With the Webjet share price more than doubling since hitting its April low, investors may have guessed that trading conditions are starting to improve.

According to Webjet’s most recent update, its Webjet OTA business recorded monthly bookings of 18,700 during September. While this is down from its pre-COVID average of 131,300 per month, this recovery is stronger than the market average.

Management advised that Webjet OTA’s bookings are 14.2% of pre-COVID levels, which compares favourably to a 7.1% recovery by the rest of the market. This side of the business will reach break-even when levels hit 23% of 2019’s levels.

The key WebBeds business is also improving, though it remains a long way from becoming breakeven. As of 7 October, its average total transaction value (TTV) stood at 12% of calendar year 2019 levels. Management advised that it needs to surpass 45% of 2019’s levels to become profitable again.

But with vaccines being approved and rolled out across the world, there are hopes that travel markets could return to some form of normality mid to late next year and booking volumes could improve enough for Webjet to become profitable again.

This appears to have got investors excited and supported its share price over the last few months.

What happens in 2021, only time will tell. But one thing that is for sure, is that Webjet will be a company to watch closely.

More reading

• ASX 200 shares hardest hit by COVID-19 in 2020
• These are the 10 most shorted shares on the ASX
• ASX 200 ends slightly down
• ASX 200 down 0.4%: NIB jumps, a2 Milk rebounds, WiseTech sinks lower
• These are the 10 most shorted shares on the ASX

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

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The outbreak of the coronavirus pandemic earlier this year threw the ASX into a panic. The S&P/ASX 200 Index (ASX: XJO) fell 36% from its February high to its March low and is only now testing pre-pandemic levels.

But there have been winners and losers along the way. Some ASX 200 shares have boomed as pandemic related tailwinds drove customer growth (hello, Afterpay Ltd (ASX: APT)). But many others have suffered due to pandemic-related restrictions. 

For example, ongoing travel restrictions have taken their toll on ASX travel shares, which remain well down from their pre-COVID highs. With domestic borders in a state of flux, consumers are hesitant to make travel plans that may have to be hastily cancelled. International travel remains off the cards for most.

Lockdowns have also taken their toll on the retail sector, with all but essential stores shuttered across the country for parts of the year. This has impacted landlords, who have had difficulty collecting rents from tenants unable to open stores.

With this in mind, we take a look at some of the ASX 200 shares hardest hit by COVID in 2020. 

Company	Share Price (at the time of writing)	Share Price Decline in 2020
Flight Centre Travel Group Ltd (ASX: FLT)	$16.67	-58.96%
Unibail-Rodamco-Westfield (ASX: URW)	$5.26	-53.20%
Webjet Limited (ASX: WEB)	$5.27	-45.39%
Treasury Wine Estates Ltd (ASX: TWE)	$9.41	-43.31%
G8 Education Ltd (ASX: GEM)	$1.21	-37.79%
Qantas Airways Limited (ASX: QAN)	$4.95	-32.38%

ASX 200 travel shares bear the brunt 

The list reveals that ASX 200 travel shares have been among the hardest hit by the COVID-19 pandemic.

Flight Centre

Flight Centre shares started the year trading above $51 dollars, but are ending the year among the most shorted stocks on the ASX. The travel management company was dumped from the ASX 100 in the December quarterly rebalance as a result of its share price slide.

Flight Centre reacted to the pandemic by withdrawing guidance in March and cancelling its interim dividend. By April, the company was raising $700 million in emergency equity as it announced annualised cost reductions of $1.9 billion. More than 50% of stores were shuttered globally, including more than 40% of Australian outlets. 

Flight Centre has reported seeing green shoots in the travel market following the almost total shutdown of travel in April and May. Revenue for September was $25 million, about 12% of its normal level, or $38 million with government subsidies included. Recovery in some locations that would normally be material contributors to group earnings, such as Australia, the United Kingdom, and the United States, have been hampered by ongoing curbs on travel. 

Webjet

The Webjet share price has also suffered in 2020. The company announced a record half year result in February and provided full year guidance of $162 to $172 million in earnings before interest, tax, depreciation and amortisation (EBITDA). The record first half profits quickly became a memory as borders were closed in March and the gains of the first half erased.

Full year total transaction volumes were down 21% on the prior year at $3 billion and revenue was down 27% to $266.1 million. In April, Webjet conducted a $346 million capital raise to strengthen the balance sheet and reduce debtor exposure. Cost reductions have been implemented to reduce costs by 50%. 

Qantas

Qantas grounded its international fleet in March and cut domestic flights by 60%. As domestic border restrictions eased, Qantas increased flights, with domestic capacity at 68% of pre-COVID levels in December, prior to the Sydney COVID outbreak.

Qantas has warned of a substantial statutory loss for FY21. The first half is expected to be close to break even while the second half is expected to be net cash flow positive (excluding redundancies). This will allow Qantas to start repairing its balance sheet in the second half of FY21. A recovery program is also on track to deliver at least $1 billion in annual savings from FY23.

ASX 200 retail and education shares were not unscathed

But it wasn’t just ASX 200 travel shares that suffered in 2020. Shopping malls were deserted as the pandemic gripped the globe, closing all but the most essential stores. Landlords struggled to collect rent from tenants unable to trade, resulting in the share prices of ASX listed shopping centre operators plunging.

Unibail-Rodamco-Westfield

Unibail-Rodamco-Westfield saw net rental income decline by 17.2% in the September quarter while the company’s portfolio value fell 10.7%. The shopping centre operator conducted a $2 billion bond placement in November to strengthen its liquidity position and lengthen debt maturity. Unibail is also selling parts of its portfolio via a $4.8 billion disposal program and recently entered into an agreement to sell several office buildings in France.

G8 Education

The childhood education sector has also been a victim of the pandemic, with this ASX 200 share seeing its value crushed in 2020. G8 Education is one of Australia’s largest providers of early childhood education and care with more than 470 early learning centres across the country. The company reported a 28% decline in revenue in the first half of the year, driven by the capped revenue model under the government’s ‘free’ childcare package.

Following an immediate hit to occupancy at the start of the pandemic, G8 Education has seen occupancy levels increase in the period since, with like-for-like occupancy 75.5% in December. Nonetheless, the focus remains on cost management, with 2021 expected to be a recovery year given the absence of additional government subsidies and ongoing impacts of COVID-19 on occupancy. 

Aussie-China trade tensions apply pressure

Finally, the pandemic has seen strained relations between Australia and China, resulting in the introduction of new restrictions on the import of Australian goods.

Treasury Wine Estates

This has been particularly bad news for Treasury Wine Estates. The ASX 200 share went into a trading halt in November when China announced anti-dumping measures on wine imports from Australia to China. Demand for Treasury Wine Estates’ products in China is expected to be extremely limited while the anti-dumping measures remain in place. China represents 25% of annual global Penfolds allocations.

Treasury Wine Estates plans to expand growth across other priority markets where there is unsatisfied demand, including in Australia, Europe, the US, and Asian markets outside of China. 

Foolish takeaway

2020 may have been an annus horribilis for these ASX 200 shares, but a light is on the horizon. The prospect of a widespread COVID vaccine in 2021 is bringing hope for an improvement in trading conditions for many.

There is no doubt 2020 has been a year like no other, and for these ASX 200 shares, a year they may rather forget.

More reading

• These ASX dividend shares offer investors attractive yields
• ASX 200 up 0.65%: Big four banks rise, tech shares charge higher, Flight Centre jumps
• These are the 10 most shorted shares on the ASX
• 2 ASX dividend shares with big yields
• 3 of the best ASX shares to buy right now

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited and Webjet Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post ASX 200 shares hardest hit by COVID-19 in 2020 appeared first on The Motley Fool Australia.

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The rocketing value of Bitcoin appears to be coming at the expense of the gold price – and that can’t be good news for ASX gold miners.

The question is whether investors should quit these outperforming ASX stocks while they are still ahead.

The price of the most popular cryptocurrency surged to a record high of US$23,000 earlier in the month before pulling back. But Bitcoin is still hovering close to these record highs.

Bitcoin eating gold’s lunch

In the meantime, gold’s rally seems to have stalled. After hitting an all-time high of US$2,075 an ounce in August, it’s fallen around 10%.

Experts believe that gold investors are starting to switch to Bitcoin as a hedge against inflation. Online payment leaders like Paypal Holdings Inc (NASDAQ: PYPL) and Square Inc (NYSE: SQ) are also legitimising the crypto by processing Bitcoin payments.

ASX gold miners facing a Bitcoin challenge?

This trend threatens ASX gold stocks after many have delivered strong returns in 2020 as COVID‐19 drove investors to safe haven assets.

The Ramelius Resources Limited (ASX: RMS) share price jumped 42%, the Evolution Mining Ltd (ASX: EVN) share price added 35% and the Northern Star Resources Ltd (ASX: NST) share price gained 12% in the past year.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) is yet to fully recover all the losses from the COVID market meltdown.

Why you shouldn’t write-off ASX gold stocks just yet

But all may not be lost for the yellow metal. Goldman Sachs believes that gold and Bitcoin can coexist, reported Bloomberg.

While the investment bank acknowledges that Bitcoin is stealing some of gold’s thunder during times of economic stress and uncertainty, the precious metal can’t be replaced.

“Gold’s recent underperformance versus real rates and the dollar has left some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice,” Bloomberg quoted Goldman as saying.

While there’s been some substitution, “we do not see Bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort.”

Bitcoin vs. gold in safe haven battle

There are a few reasons driving Goldman’s view. The bank pointed out that Bitcoin suffers from transparency issues, which discourages institutions and wealthy investors from investing in the crypto – at least not in a big way.

The wildly fluctuating price of Bitcoin is another turn-off. There’s too much “hot money” in Bitcoin as traders use it to make speculative profits as opposed to an insurance policy.

This means there is a lower probability that the value of Bitcoin will hold when distressed investors need it to.

I would also point out that gold has a 3,000-year track record as a safe haven. Even if Bitcoin does evolve to be a good substitute, this won’t be happening overnight.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 rises 0.5%
• Key risks and rewards for ASX share investors heading into 2021
• 2020 was good for investors, will 2021 be even better?
• ASX 200 up 0.65%: Big four banks rise, tech shares charge higher, Flight Centre jumps

Brendon Lau owns shares of Evolution Mining Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends PayPal Holdings and Square and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended PayPal Holdings. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the surging Bitcoin an existential threat to ASX gold miners? appeared first on The Motley Fool Australia.

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