Down Stocks in an Up Market

We can probably all agree that 2020 was a unique investment year, with the pandemic ravaging the economy, reducing travel, and even removing the normal commute to the office—and at the same time delivering above-average 15.76% returns on the S&P 500 index. But not every company sailed through the pandemic unscathed.

Consider New Residential Investment, a mortgage REIT which specializes in title insurance, appraisal management, and mortgage servicing in the red-hot real estate market. Its stock was down 38.4% last year.

It’s easier to understand how Spirit Airlines’ bottom line suffered in the pandemic. It is one of the low-price leaders in the air travel industry, but people weren’t traveling, so even the cheap fares didn’t result in filled passenger seats. The stock was down 50% last year. A similar fate befell Coty, the health and beauty products company whose customers abandoned its brick-and-mortar locations for online purchases—apparently buying other products. The stock finished the year down almost 36%, although so far this year it is showing a 27% gain. Carnival Cruise Lines basically had to sit out the pandemic with its ships idle, and its stock value fell nearly 50%. But its year-to-date return is a surprising 25.44%.

Other major losses in 2020 are names you might be surprised to see: Exxon Mobil was down 41% last year, and Wells Fargo stock lost 43.5% of its value in 2020.  

If there’s a point here, it’s that unexpected events like the pandemic can have disproportionately good or bad results on individual companies. The value of a diversified portfolio is that it will mitigate those occasional disasters, as well as catch the upwinds of the occasional above-average returns.

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