5 of the worst stocks of 2020

While we often like to talk about winners and success stories, we hardly ever pay attention to losers. However, their stories might be as worthwhile and full of lessons as the competitors in the top positions.

While many stocks managed a solid rebound after the pandemic many other small businesses had to close their doors forever. On financial markets, some stocks heavily outperformed benchmarks, while others showed a performance pulling out the tears of more than one investor.

In this article, you will see 5 companies from different sectors who did not pull off a great year. These are not necessarily the absolute, total, worst performing stocks on the market, but rather, were chosen to give a broad overview of the different types of losers we've seen in 2020, in different sectors such as healthcare, travel, energy, banking, and even cannabis.

Without further ado, let's jump into the 5 worst stocks of 2020.

 

Walgreens Boots Alliance (NASDAQ:WBA)

Walgreens Boots Alliance has the strange honor to be the worst stock in the Dow Jones this year. The shares went down more than 30%, and this is nothing new to the stock which has been a constant laggard for the past 5 years.

Although the stock price is at a low level, its forward price to earnings ratio is at 8.36 with a nice dividend yield of 4.6%. As a reminder, the price to earnings ratio (P/E ratio) is the price of the stock divided by earnings per share. The lower it is, the quicker one will get its investment back. In this case, it will take approximately 8.36 years for an investor to get his money back.

Investors should be careful however since the pharmacy industry has been heavily disrupted with covid-19.  Amazon has launched its own digital pharma solution, a business model which perfectly matched the trend of online shopping which, due to Covid-19, has only gained importance this year.

Although the company is also investing in the development of its digital offering, it is rather unlikely that they'll ever be any match for the astounding means of Jeff Bezos.

Overall, the stock started the year at around $60 before and slowly went down to under $40 today, a -33% for the year.

 

Walgreens Boots stock

Boeing (NYSE:BA)

This article would not make sense if we did not mention at least one airline stock – and we could mention many more. As you may see in the graph below, according to Statista, the number of passengers per year saw a sharp decline in 2020, and 2021 is not expected to see levels similar to pre-Covid years. 

 

Number of flight passengers over the years

 

Until quite recently, Boeing was the model of a solid and growing company. Its downfall has 2 names. First the terrible crashes of the 737 Max: 2 crashes killing 346 people in 5 months. The plane was supposed to be more fuel-efficient, giving the possibility to travel longer range with lower operating costs, but these horrible accidents have made regulators question the planes design and features, as well as the crew's training and experience.

As if this was not enough, the Covid-19 pandemic had a massive impact on its operations. Despite arguably terrible conditions, the stock managed a solid turnaround, from a $89 low in March to a solid $216 today. Many analysts argue that this valuation is rather optimistic, or at least a little early, as although travel should bounce back in 2021, business travel might take a while before reaching it previous level - if it ever does.

 

Boeing Stock

 

Schlumberger N.V. (NYSE:SLB)

The energy sector is one of the worst performing sector of the Dow Jones this year - neither oil nor gas have been spared in the bloodbath that was 2020. Although there was a rally in the last 2 months of the year, with hopes of a vaccine allowing the potential return of normality in a near future, the S&P 500 energy sector index went down 38% this year, as the data from Yardeni Research shows (see graph below).

 

S&P 500 Energy Sector

 

As you might imagine, we could mention a couple underperforming energy stocks such as EOG Resources, ExxonMobil or Phillips 66, but let's talk about the champion: Schlumberger. Schlumberger is the world's top oilfield services provider, and despite its importance, it did not manage to perform in this troubled year. Although the stock rallied 23% in Q4, the company lost almost half of its market valuation year to day, almost 47%. The drop in both the price and demand of oil has been heavily felt, as upstream companies heavily reduced their drilling budgets.

 

Schlumberger stock

Aurora Cannabis (NYSE:ACB)

While most cannabis company have seen a bright 2020 as marijuana sales soared during the stay-at-home period, not all companies seemed to be able to follow the trend, and among them, we find Aurora Cannabis. The Horizon Marijuana Life Sciences Index ETF has seen a 3.4% decline. Not great, some might say, but Aurora Cannabis is down 66% year-to-date, making it one of the worst performing stock of the year.

 

Horizons Marijuana Life Sciences Index ETF

 

Despite heavy cost-cutting actions, aiming for a positive EBITDA, its first 2021 quarter results saw a total net revenue down 8% to $52.7 million. Not only does the stock have no strong financial backing like other competitors such as Canopy Growth of Constellation Brands, Analysts argue that with a price-to-sales ratio of 6 and competitors trading at lower valuation multiple and stronger financials, the stock might still be overvalued.

This lack of results puts the company in a difficult place to innovate with cannabis derivatives, such as vapes, edibles or beverages, a strong disadvantages as other companies are starting to grasp market shares in all of these subsectors.

Turning in a positive EBITDA will be a major indication of whether the company will last in the long term or not, but regarding 2020, performance was beyond poor.

 

Aurora Cannabis Inc

 

For more info about cannabis stocks, I invite you to read this excellent article by our Head of Research.

Wells Fargo & Co (NYSE:WFC)

The American bank made quite some headlines this year. The stock is down over 44% this year, barely reaching the price of $30 at the time of writing.

Since 2018, following its phony-accounts scandal, the bank was punished for relentless pressure on employee’s moral, forcing them to meet quotas, opening unneeded accounts for customers, ordering credit cards without their permission, and even forging client signatures. Since then, the company is forced to operate with assets under management inferior to $1.95 trillion.

As if this was not enough, the pandemic only made matters worse. The company took at $2.4 billion loss in the second quarter and was forced to cut dividends by 80%. Additionally, a hundred employees were accused of making false representation to apply for relief funds. This does not help the image of the company, although they claimed to have fired the accused employees. 

 

Wells Fargo & Company

 

This is it for the 5 of the worst stocks of 2020. Although this article might seem quite pessimistic, it does not mean that these stocks will not be able to make a comeback, on the contrary. As we always say, past results are not a guarantee for future performance. If this statement is valid for good results, it is no less valid for less glorious years.

Read our article about defensive stocks.

 

Sources:

7 worse Dow Jones Stocks of 2020, in NASDAQ

7 Worst performing stocks of 2020, in NASDAQ

Worst Performing Stocks of 2020, in Yahoo Finance

5 of the Worst-Performing Bank Stocks in 2020, in NASDAQ

Wells Fargo Fires More Than 100 Employees Accused Of Coronavirus Relief Fraud, in NPR

Should I buy the FTSE 100’s 5 worst performing stocks of 2020?, in the Motley Fool

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