The best and worst investments of 2019, from unstoppable Shopify to the cannabis buzzkill
Investors entered 2019 on shaky footing after a major sell-off in the fourth quarter of 2018. But just as quickly as the gloom set in, stocks came roaring back to life. By late December, the Dow, the S&P 500 and Canada’s S&P/TSX Composite Index had all posted gains of more than 20 per cent for the year, while the Nasdaq was up more than 30 per cent. An improving economic picture — thanks to the ratification of the USMCA trade deal and signs of a thaw in U.S.-China relations — has some market watchers cautiously optimistic about 2020, too. But before we get ahead of ourselves, the Financial Post’s Geoff Zochodne looks back at some of the winners and losers from the world of investing in 2019.
In times of uncertainty, investors have been known to turn to gold as a safe haven, and 2019 was no different. With unknowns clouding the global economic picture, investors — along with central banks — decided the downtrodden sector had been punished enough, and drove the price of the yellow metal out of a seven-year valley and to highs of more than US$1,500 per ounce. For miners, who are generally highly leveraged to the price, the results were spectacular. Many of the top-performing stocks on the S&P/TSX Composite Index this past year were miners: Alacer Gold Corp. (up more than 150 per cent), Eldorado Gold Corp. (up more than 130 per cent) and Detour Gold Corp. (up more than 100 per cent) were just a few. Heavy M&A activity, including deals for Detour and Leagold Mining Corp. didn’t hurt either. While the rally stalled in the final quarter, continued stimulus spending around the world has gold bugs optimistic that 2020 could be even better.
Lululemon Athletica customers are known to be flexible. But investors in the maker of yogawear have had to tolerate some twists as well, particularly as shares of the Vancouver-based company tumbled along with the rest of the market to close out 2018. This year, however, has been another story entirely. Shares of Lululemon are up more than 80 per cent for 2019, as the company has turned considerable profits, reported 10 per cent same store sales growth in back-to-back quarters and continued to expand abroad, particularly into the massive Chinese market. Lulu’s expansion efforts also include taking aim at menswear. With a market cap approaching $30 billion, it isn’t a stretch to say Lulu has a chance to become the next Adidas or Nike.
Tim Cook — or Tim Apple, as U.S. President Donald Trump calls him — has presided over a banner year for the smartphone maker’s shares, and he may have Trump to thank. After watching its stock swoon below US$150 in 2018 due to concerns over iPhone sales and tensions with China, Apple bounced back to hit all-time highs of more than US$280 a share after Trump announced a “Phase One” trade deal in mid-December. The year also saw Apple break new ground by entering the highly competitive streaming business with its Apple TV+ offering, another sign of its increasing reliance on services over hardware. All of this has translated into major gains: Apple’s stock price is up more than 70 per cent for 2019, outperforming fellow Silicon Valley giants such as Alphabet Inc. and Facebook Inc.
Things were apparently going so well for Shopify Inc. this year that its chief executive, Tobi Lutke, took a day off and streamed himself playing the video game Starcraft II. Shareholders may be able to afford to take a few days off, too. After a third-quarter surge, Shopify shares are trading above $500, up nearly 175 per cent for 2019 making it the best performing stock in the S&P/TSX Composite Index. Remarkably, it’s the third-consecutive year the Ottawa-based e-commerce platform has appeared in the TSX Top Ten. The ongoing shift to digital retail helped drive the gains, but so too did the company’s results. While still running at a loss, Shopify reported results in October that saw the company beat analysts’ revenue expectations for the 17th quarter in a row. Its not just shareholders who are taking notice: In December, CNBC’s Jim Cramer said at least two big Silicon Valley companies were interested in buying Shopify. Can anyone say four in a row?
Greece has been a bad boy of international finance for years, as problems with government debt in the wake of the financial crisis exploded into an economy-wide emergency prompting bailouts from the International Monetary Fund and the rest of Europe. Yet the Greek economy showed signs of life in 2019, and a summer election brought to power a conservative government intent on cutting taxes and giving the private sector sector a jolt. Efforts aimed at cleaning up the balance sheets of the country’s banks helped turn them into some of the hottest stocks in the world, with shares of lenders such as Attica Bank and Piraeus Bank climbing more than 250 per cent in 2019. The chief Greek stock index led the world as well, up more than 40 per cent, according to Bloomberg data. The new government still has creditors peering over its shoulder — and Greece has a thing with tragedy — but at the moment things appear to be looking up.
The highs of 2018, brought on in part by Canada’s legalization of recreational marijuana, gave way in 2019 to the harsher realities of business. Investors developed a much more discerning eye when it came to pot stocks this year, and unprofitable producers were punished by the markets. Some of the biggest names in weed were hit the hardest: Canopy Growth Corp. declined more than 25 per cent (firing its CEO in the process), Hexo Corp. fell more than 40 per cent and Aurora Cannabis Inc. tumbled more than 50 per cent. One silver lining for firms was that their fates were not solely in their own hands. An agonizing retail rollout by Ontario’s government, for example, curbed revenue growth in what should be the biggest provincial market. While many believe the carnage will continue, a loosening of Ontario’s restrictive retail regime and the rollout of cannabis 2.0 products such as edibles offer a glimmer of hope to battered producers heading into 2020.
Shares in the beleaguered engineering company soared in late December on news a subsidiary would plead guilty to one charge of fraud and pay a $280-million fine to settle a bribery scandal related to its dealings in Libya. But even the lifting of the Libya cloud and the 25 per cent surge back to the $30 level that followed weren’t enough to erase the bad taste in investors’ mouths. After flirting with the $50 mark in January, SNC shares were struck by one calamity after another. First there were problems in Saudi Arabia, where diplomatic tensions had complicated its operations. Then it emerged that a major contract with a Chilean copper miner had gone south, sending its profits plunging. To add insult to injury, it became a central figure in the biggest political scandal of the year, when it was reported that the prime minister and officials from his office had been pressing the former attorney general about securing a possible deferred prosecution agreement for the company. With the guilty plea allowing the company to get on with its business, investors can take solace in the fact that it is hard to imagine a year any worse than SNC’s 2019.
The Swedish Krona
Sweden’s crown has had a rough year, as the Scandinavian country’s growth has slowed amid a correction in the housing market that sent ripples out into the broader economy. Negative interest rates haven’t helped much, but they have weighed on the currency — the krona has been the worst performer among the world’s major currencies this year, losing more than five per cent of its value against the U.S. dollar, according to Bloomberg. There have, however, been some positive developments in recent weeks, such as greater-than-expected growth for the third quarter. Sweden’s central bank, the Riksbank, also lifted interest rates out of negative territory in December: the benchmark repo rate now sits at zero per cent.
Occidental Petroleum Corp.
Sometimes even the support of Warren Buffett isn’t enough to keep the bears away. Shares of Occidental Petroleum Corp. are down more than 35 per cent this year, with most of that coming after the major U.S. oil and gas producer’s successful US$55-billion bid (debt included) for rival Anadarko Petroleum Corp. Occidental had to out-duel Chevron Corp. for the deal, and the acquisition got done with the help of US$10 billion in financing from Buffett’s Berkshire Hathaway. The financing, though, sparked outrage and opposition from fellow billionaire investor and Occidental shareholder Carl Icahn, who voiced concerns about Occidental’s debt-load in the wake of the deal. The acquisition has also come amid signs the U.S. shale boom is slowing and as oversupply and warmer temperatures have teamed up to weigh down natural gas prices — not exactly music to the ears of energy investors. Nevertheless, Occidental said in November that it is making progress on its financial goals and that it plans on further deleveraging in the months ahead.
Lebanese politics have always been a bit of a tangle, but 2019 saw the Middle Eastern country fall into a tailspin. Protests against the ruling class forced the resignation of the prime minister, banks have blocked customers from their savings and the Lebanese pound has tumbled in value. Political gridlock has set in, and in the meantime, Lebanese stocks have entered free-fall. The BLOM stock index, which reflects the value of companies listed on Beirut’s stock exchange, is down more than 20 per cent for the year, ranking it as the worst-performing index in the world, according to Bloomberg data. Turning the country around could still take some doing: as of mid-December, Lebanon was still looking for a new prime minister.