2020 brought with it the fastest drop to a bear market in history. It is said that when the market drops more than 20% from the highs, it enters the bearish territory, or, when it bounces more than 20% from the lows, a bullish market starts.
In 2020 we have seen both the fastest drop to a bear market and the fastest bounce to a bullish market.
From the moment stocks entered the bullish territory, they never looked back. With just two trading days ahead of the end of the year, U.S. stock market indices are at all-time highs, and so are other indices in different parts of the world (e.g., Dax index in Germany).
What Companies Gained the Most?
The tech sector benefited the most. Investors piled into stock companies as work from home became a reality. Microsoft, Google, Amazon, Facebook, Apple – they all benefited from people being forced to spend more time online.
The chart above shows the largest thirteen companies in the world in terms of market capitalization. Market capitalization is obtained by multiplying the number of shares publicly available with the price of each share.
Out of all thirteen stocks, two of them stand out of the crowd. One is Tesla.
2020 has been the year when Tesla became the most valuable auto-maker in the world. Investors are willing to pay high multiples for the company’s stock price in the idea that everything will “go green” eventually, and Tesla has a solid foot in the electric vehicles market and other technological solutions.
Also fueled by the inclusion in the S&P500 index, Tesla shares continued to rise, and the company exceeds $600 billion in market capitalization. In doing so, it surpassed Berkshire Hathaway – the other company with an unusual presence in the list above.
That is, unusual only because it managed to stay at the top despite investors piling into tech companies. Berkshire is no tech company, but a cash-rich one. One of Buffett’s main philosophies in investing is to look for undervalued companies with rich cash flow streams. This allowed Buffett to make some investments in 2020, the most notable being a 10% stake in the biggest five trading houses in Japan.
People like to compare the rise of the tech sector in 2020 with the tech bubble in the late 90s, early 2000. However, this time is different, as the industry is matured enough to still have room to grow and to make a place for other competitors.
How many of these companies will still make the list at the end of 2021?