How did my stock picks for 2020 perform?

2020 was the most unpredictable of years for the stock market. Even so, my stock picks for the year performed robustly, writes Thomas Carr.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In normal times, the New Year is a period to look back upon the year that’s just gone. It’s a time to appreciate what went well and learn from what didn’t go so well. This one’s a bit different. 2020 was a year that virtually all of us will want to forget. Even so, I’m going to use this time to look back at how my stock picks performed in the most unusual of periods.

Throughout 2020, I picked out 36 stocks that I thought would make good investments. The stock selections covered a range of industries and company sizes. They also had varying risk profiles, while the underlying companies where also at different stages of maturity. Some of the stocks were picked twice, so here I’ve only included the returns from the first time I chose a particular share.

How did I do?

Assuming all investments were equally weighted and made on the day I wrote about them, the potential stock picks for my portfolio would have finished the year up 3% (without including dividends). Investing the same amounts, at the same time, in the FTSE 100 would have produced a return of 0%. Meanwhile, investing a lump sum in the FTSE 100 at the start of the year would have lost 14%.

Some 61% of the portfolio gained in value. Of note were the performances of Ferrexpo (+58%) and Goco (+42%), but there were another six stocks that returned over 20%. What this means is that the performance of the portfolio was significantly weakened by just a couple of stocks.

In this case, it was Costain (-64%) and IAG (-52%) that caused the damage. Taking just these two shares out of the portfolio increases the return to 7%. The portfolio’s returns also show a clear divide between before the pandemic began in March and thereafter. Stocks picked before mid-March lost 13%, compared to a gain of 14% from those picked after that point.

In fact, the biggest drags on the portfolio (IAG and Costain) were both picked at the beginning of March. Looking back to that point, it seems clear that I didn’t appreciate the true scale of the pandemic and the lasting effect it would have. But making mistakes is part of investing. Experiences like this allow us to make better decisions in the future.

Investment lessons from 2020

More than anything else, I think these results show how important it is to buy shares at low prices. This provides us with a serious opportunity to make outsized returns. And prices tend to be at their lowest during a stock market crash. That’s certainly what we saw this year. It may seem like a scary time to be investing, but in fact I think it’s a great time to buy.

Another thing to take away from the performance of my stock picks is the benefit of investing regularly over the course of a year, as opposed to investing in one lump sum. This way we buy at a range of prices. Although admittedly, the difference isn’t usually so marked as it was this year. Investing in a number of different stocks also reduces risk and improves our chances of achieving positive returns. After all, 39% of my portfolio lost value. Investing in one of these stocks on their own could have been disastrous.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Thomas has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Would a stock market crash matter?

Christopher Ruane explains why a stock market crash could turn out to be positive, not negative, for a private investor…

Read more »

Investing Articles

Has the Rolls-Royce share price peaked?

After a strong 2023 performance and (so far) in 2024, the Rolls-Royce share price has stuttered in recent days. Christopher…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Turning a £20k ISA into a £13,900 yearly second income? It’s possible!

By investing a £20k ISA now using certain basic principles, our writer thinks he could set up a second income…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

With no savings, I’d follow Warren Buffett’s number one rule to build wealth

Can this one piece of Warren Buffett wisdom really help our writer as he aims to build wealth in the…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

A second income of £1k a month from just £10 a day! How would I do that?

Mark David Hartley considers how to build a second income stream starting from just £10 a day. Is £1,000 a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Turn £8,900 into a £24k annual passive income? Here’s how!

Christopher Ruane applies some investing lessons from billionaire Warren Buffett when explaining how he'd aim to earn sizeable passive income…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »