2020 Annual Letter (and what to look forward to in 2021)
By Richard Harrington
To the supporters and stakeholders of RH Group:
2020, the year most of the world went online.
Personally I have been invited to speak at nine online summits in 2020 alone!
We know the IT and Big Tech industry had a beyond amazing year.
It was the year Zoom crushed Skype.
Zoom Video Communications returned 425% in 2020.
But I can't continue this letter without speaking about the stellar stock of 2020, Tesla.
Tesla's stock was up an incredible 695% in 2020,
making it one of the most valuable companies in the world with a $827 billion valuation.
When Tesla was added to the S&P, its market capitalization was greater
than the combined stock-market values of
Toyota, Volkswagen General Motors Co.,Ford Motor Co.Honda Motor Co and Nissan Motor Co.
But this growth isn’t unique to Tesla, shares of NIO, China’s version of Tesla rose 1,110% in 2020.
This entire EV (Electric Vehicle) industry is now showing signs of incredible momentum and long-term growth potential.
The FAANG stocks also did not disappoint in 2020:
Class C shares and Class A shares gained 31%.
There are also Pharma and Healthcare stocks which benefited from the Covid19 pandemic.
Vaccine candidate makers
Pfizer, BioNTech and Moderna have surged 13%, 220% and 720% this year.
Although I believe in investing in the Gene therapy sector (Genomics),
I don't believe in investing in the pharmaceutical sector.
What's the difference?
Genomics is an interdisciplinary field of biology focusing on the
structure, function, evolution, mapping, and editing of genomes.
A genome is an organism's complete set of DNA, including all of its genes.
This can help in early detection of future diseases.
In contrast, the pharmaceutical sector profits from treating existing diseases.
Which I believe to put bluntly, is unethical investing.
Gene therapy on the other hand involves preventing future diseases through early detection in DNA.
As a side note, I also don’t invest in gambling, tobacco or
any other industries who profits from one's addictions.
Although none of us are perfect, I do try my best to invest in a socially conscious way.
Here are the Top 20 best-performing S&P 500 stocks of 2020:
1. Tesla Inc. US:TSLA Motor Vehicles 743%
2. Etsy Inc. US:ETSY Miscellaneous Commercial Services 302%
3. Nvidia Corp. US:NVDA Semiconductors 122%
4. PayPal Holdings Inc. US:PYPL Data Processing Services 117%
5. L Brands Inc. US:LB Apparel/Footwear Retail 105%
6. Albemarle Corp. US:ALB Chemicals: Specialty 102%
7. Advanced Micro Devices Inc. US:AMD Semiconductors 100%
8. Freeport-McMoRan Inc. US:FCX Other Metals/Minerals 98%
9. Cadence Design Systems Inc. US:CDNS Software 97%
10. ServiceNow Inc. US:NOW Information Technology Services 95%
11. Align Technology Inc. US:ALGN Medical Specialties 92%
12. Idexx Laboratories Inc. US:IDXX Medical Specialties 91%
13. Abiomed Inc. US:ABMD Medical Specialties 90%
14. West Pharmaceutical Services Inc. US:WST Medical Specialties 88%
15. Synopsys Inc. US:SNPS Software 86%
16. Catalent Inc. US:CTLT Pharmaceuticals: Other 85%
17. Apple Inc. US:AAPL Telecommunications Equipment 81%
18. Quanta Services Inc. US:PWR Engineering & Construction 77%
19. Rollins Inc. US:ROL Other Consumer Services 77%
20. Amazon.com Inc. US:AMZN Internet Retail 76%
Key Takeaways from these Top performing stocks?
Firstly, the reason I don't invest in index funds is they always underperform winning stocks.
In a year of record returns on the stock market (as seen above), the S&P 500 only rose by 16.3% in 2020.
One of the most popular index is The S&P 500.
The S&P 500 is a stock market index that measures the stock performance of 500 large companies
listed on stock exchanges in the United States.
It is one of the most commonly followed equity indices.
And the world's most successful stock investor of all time,
Warren Buffett, with a net worth of over $80 billion dollars
amassed his billionaire dollar fortune by investing into individual stocks,
not index funds or ETFs.
If you want to beat the market, you have to lead the herd, not follow the heard.
And investing in an index (or ETFs), is simply that, following the herd.
You are simply over diversified when you invest into funds or index trackers
which makes it impossible to beat the market-
which we refer to as alpha returns (any returns above the market index or benchmark).
Even a company as big as Zoom (market capitalisation of more than $114 billion,
putting it well above many current S&P 500 stocks) is not even included in the S&P 500 yet.
Secondly, in investments we have a famous saying,
Revenue is vanity.
Profitability is sanity.
This saying is famous for a reason because the goal of any business is not to make money
but to make a profit. (And as I've alluded to above, profit that is socially conscious, benefiting all stakeholders).
But not just profit for the previous 12 months, but the intelligent investor always asks these questions:
-What is the profit track record for the past 10 years?
-What is the profit outlook for the next 10 years?
-Does the business model support a profit outlook that is
consistent, sustainable and to some extent predictable?
Here are the Top 10 Most profitable companies in the US for 2020:
1. Berkshire Hathaway (Insurance): $81.4B
2. Apple (Computers & software): $55.3B
3. Microsoft (Computers & software): $39.2B
4. JPMorgan Chase (Internet services & retailing): $36.4B
5. Alphabet (Internet services & retailing): $34.3B
6. Bank of America (Internet services & retailing): $27.4B
7. Intel (Electronics, electrical equipment & electronic components): $21.05B
8. Wells Fargo (Financials): $19.5B
9. Citigroup (Financials): $19.4B
10. Verizon Communications (Telecommunications): $19.3B
Its certainly not surprising that topping this list is Warren Buffett's Berkshire Hathaway,
with over $80 billion in profits for 2020.
Side note, Berkshire Hathaway is more profitable than any company worldwide except for oil giant Saudi Aramco.
Berkshire Hathaway with a market capitalisation of $546 billion,
and is on the road to becoming a $1 Trillion dollar company
joining the likes of Apple $2.266T, Microsoft $1.806T, Amazon $1.696T and Google $1.301T .
It was Warren Buffett who actually said,
“If you aren't thinking about owning a stock for 10 years, don't even think about owning it for 10 minutes.”
And it was such an honour for me to be featured alongside my all time mentor Warren Buffett in the December 2020
issue of Forbes Magazine in an article titled "Investors Share Their Top Secrets of How to Profit During a Recession."
This was definitely one of my highlights for 2020 and a great way to end off the year!
And inspired me to set a 10 year vision because
many people overestimate what they can achieve in one year,
and underestimate what they can achieve in ten years.
Therefore at RH Group here is our mission for the next decade:
"To empower one billion people with the tools to set themselves financially free by 2030".
We only start companies which support our 10 year mission statement.
My third takeaway from 2020 is the importance of hedging.
Simply put, hedging is when you make an investment that protects you against a financial loss.
The broad indexes actually crashed in March,
only to roar back as unprecedented stimulus from the Federal Reserve
which drove a tremendous amount of money into equities,
causing an artificial rise in markets as the economy was still reeling.
You have to hedge your investments against the government continually printing money.
I do this by investing into Gold and Silver.
Average return of Gold in 2019 was 20.71%
but in 2020 Gold returned 31.05%
(and Silver also at 30% for 2020).
And there is no sign that government will stop printing money in an effort to ‘revitalize’ the economy,
making hedging an essential investment strategy as we go into 2021.
What else does 2021 have in store for us?
Looking to 2021
It is important to note that most wealthy people build their fortunes in recessions
because that's when asset prices of undervalued.
What most average people do is they buy high, hoping to sell higher, this is the dumbest thing you can do.
As cliche as this may sound, you buy low to sell high.
If the Tech and EV sectors are overvalued*, where else can you look?
*I'm not saying the likes of Zoom and Tesla share prices won't further increase in 2021,
what I am saying is that at current levels they are overvalued, massively overvalued.
We know where the puck is now,
but where is the puck going?
Enter my Top 10 sectors for 2021
Renewable energy sector (Green Energy and Clean Energy). Developments in technology is making it easier to scale on a global level.
Plant based food sector (plant based meat). Concern for animal welfare and the environment- McD introducing the Mcplant and Beyond Meat partnering with Pizza Hut, found large scale with their flagship product, Beyond Burger, which many are saying really delivers on taste.
Gene therapy (Genomics) As explained in the above part of this letter.
Cyber Security sector. As the cashless society continues to become a new way of life, online merchants are set to benefit which puts the cyber security stocks in an essential service in 2021.
5G sector. The sales of 5G providers are set to double in 2021 (forget the conspiracy theorist who are mostly bored and broke.)
Space Internet (Elon’s Starlink) Fast connection and improved coverage for remote areas- bridging the internet divide!
Space Tourism and Exploration- Virgin Galactic recently allowed 600 people to sign up at $250k each to go 80km above the earth in sub orbital flight to experience weightlessness for a few minutes.
Tourism and hospitality sector. I can't find a more undervalued sector than this due to the covid19 pandemic.
Airline sector (and everything air travel related)- This sector is recession proof as government will always bailout failing airlines.
And finally the banking Sector which also in times of pandemics, banks will always be bailed out by the government.
I trust that my latest annual letter has added value to you,
that you are not only informed but inspired to take action.
I am filled with a fresh breath of optimism for this new year, and I hope you are too
(I have never seen a pessimist on the Forbes list of the ultra wealthy).
And come to think of it Uber, Instagram, Tesla and Airbnb didn't event exist in 2007.
These success stories were created out of the last crisis, the global financial crisis.
What is stopping you from becoming the next success story?
Let's not let this crisis go to waste. Every crisis is an opportunity.
And the more blessed we are, the more we can be the blessing unto others.
Founder, RH Group
February 3, 2021
PS To get a premium research service that is focused on the top sectors mentioned above,
Richard Harrington has researched the following
12 Best stocks to outperform in the new Post Covid-19 Economy:
2 best undervalued stocks in the Genomics industry.
2 best undervalued stocks in the Clean Energy industry
2 best undervalued stocks in the Cyber Security industry
2 best undervalued stocks in the Plant based industry
2 best undervalued stocks in the Space Exploration industry
2 best undervalued stocks that will outperform as the cashless society becomes the new norm
To apply for this premium research service you can go to:
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Recipients should not assume that securities identified in this presentation, or otherwise related to the information in this presentation, are, have been or will be, investments held by accounts managed by RH Group. You should verify all claims and conduct your own due diligence prior to making any investments.
The information contained in this presentation should not be considered a recommendation to purchase or sell any particular security, and it should not be assumed that the securities identified in this presentation, or otherwise related to the information contained in this presentation, have been or will be profitable. In considering the prior performance information contained in this presentation, investors should bear in mind that past results are not necessarily indicative of future results.
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