These Are the Themes That Defined 2020 in European Stocks

The winners and losers in a wild 2020 for European stocks were determined by what defined the year for everyone: a global pandemic.

The list of winners in the Stoxx Europe 600 Index is dominated by companies that benefited from a workforce stuck at home and those reliant on trends insulated from the pandemic’s effects, like renewable energy. On the flip side, airlines, cruise operators and shopping-mall owners took a hit as travel all but stopped and most countries imposed lockdowns.

A year ago, no one could have predicted the upheaval that crushed the economy. The euro area contracted by an estimated 8.3% in 2020, according to the International Monetary Fund. In November investors began shifting into cheaper stocks in anticipation of vaccines bringing an end to the pandemic, but that hasn’t been enough to erase losses for the laggard sectors.

“The year 2020 has highlighted the risks of putting too much faith in economic projections or market expectations,” Mark Nichols and Mark Heslop, the heads of European equities strategy at Jupiter Fund Management, wrote in a 2021 outlook piece. Sticking with industry-leading companies able to adapt to change is more important than trying to divine where the economy is going, they said.

These are the themes that defined the year in European equities and a couple of stocks that exemplify them:

The Winners…

Working From Home

Employees being stuck at home caused a surge in demand for computer equipment, collaboration software and tech support. In the case of the best performing stock in Europe, Sweden’s Sinch AB, most analysts say that growth will continue as online commerce booms. The company provides the automated messages that tell you a taxi or a parcel are on the way or remind you of a doctor’s appointment. See also the gains made by remote-access firm TeamViewer AG and mouse and keyboard maker Logitech International SA.

Ordering to Home

Going shopping for food or clothes became more difficult in 2020 and the convenience of ordering takeout via an app became much more attractive. Those trends provided a huge boost for the likes of HelloFresh SE, Delivery Hero SE, Zalando SE and Ocado Group Plc, plus the blockbuster debut of Polish e-commerce firm SA.

Placing Bets

Gambling stocks thrived despite sporting events being canceled, mainly as investors looked to the opportunity from sports-betting legalization in the U.S. Flutter Entertainment Plc cemented its position in the growing U.S. market with the acquisition of a stake in bookmaker FanDuel, but the top performer was online casino software firm Evolution Gaming Group AB.

Green Growth

It was a pivotal year in the transition toward renewable energy, underpinned by massive government spending pledges and corporations working to burnish their environmental, social and governance credentials. An index of the biggest European companies in the industry soared more than 90%. Shares of wind-turbine maker Vestas Wind Systems A/S doubled while Nel ASA, a maker of electrolyzers used to produce hydrogen, more than tripled.

Medical Testing

When a pandemic strikes, demand for medical equipment soars. Italy’s DiaSorin SpA was among the main beneficiaries of a surge in the need for diagnostic equipment, along with France’s BioMerieux SA. And though that initial boost may appear driven by a short-term spike in demand, it could continue into 2021 as the market remains undersupplied.

Red and Yellow Metals

Gold’s safe-haven charms came to the fore in the pandemic. London-listed Fresnillo Plc has profited from gold and silver price gains, while Poland’s KGHM SA has reaped the rewards of copper strength. Citigroup Inc. analysts said in a note to clients that there is a strong cyclical and structural case for a metals bull market lasting two to three years.

The Losers…

Oil Majors

Few parts of the market can compete with the wild, unprecedented year in crude oil. Prices for oil futures went negative for the first time ever in April as demand plummeted with much of the world in lockdown. The industry is now in the midst of a historic shift away from fossil fuels and toward renewable energy in a delicate balancing act.

The year for traditional energy stocks is best illustrated by the fortunes of Danish wind-farm developer Orsted AS and U.K. oil major BP Plc. At the start of 2020, BP’s market value was nearly triple Orsted’s. Now, Orsted is bigger.

No Vacations

The precipitous drop in demand for travel has hammered multiple industries. Airlines, cruise ships, tour operators and planemakers, plus their supply chains, have spent much of the year just surviving. IAG SA, the owner of British Airways, and cruise operator Carnival Plc have both fallen by about two-thirds. The arrival of the first vaccines at the end of the year sparked a rally in anticipation of a better 2021, with the Stoxx 600 Travel & Leisure Index recovering almost three quarters of its decline.

Shopping Malls

The acceleration of e-commerce produced a few winners and on the flip side of the trade, it hurt mall owners. The U.K.’s Intu Properties Plc fell into administration and others like Unibail-Rodamco-Westfield and Hammerson Plc have been trying to survive by raising new funds and retooling their portfolios. New lockdowns took effect in countries including the U.K. late in the year, clouding the outlook. The companies will still “face an uphill battle” in the first half of 2021, said Bloomberg Intelligence senior property analyst Sue Munden.

Bank Woes

European bank stocks suffered as Covid-19 hit the region’s economies and caused concerns about a spike in bad loans. Lending margins also remain under pressure with the European Central Bank set to maintain ultra-low interest rates until the pandemic is over. Spain’s Banco Sabadell SA was the worst performer, with only six stocks in the Stoxx 600 Banks index in the green for the year.

— With assistance by Macarena Munoz Montijano, and Morwenna Coniam

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