January 23, 2022

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The Top (and Bottom) 5 Stocks of 2021

The top and bottom five stocks in the Russell 1000 Index were chosen by finding the stocks with the highest and lowest year-to-date (YTD) total return through the close of the market on Dec. 3, 2021. The Russell 1000 Index is an index made up of the 1000 largest companies whose stocks trade in the U.S. by market capitalization, accounting for roughly 92% of the total U.S. stock market by the same measure. It can therefore be seen as a useful proxy for the U.S. stock market as whole, especially for large-cap stocks.

Key Takeaways

  • The market as a whole, as measured by the Russell 1000 Index returned 20.5%.
  • GameStop was the top stock of 2021 with a year-to-date total return of 815.0%.
  • StoneCo was the bottom stock of 2021 with a year-to-date total return of -81.8%.
  • The top 5 stocks are riding a number of hot trends this year: the “meme stock” frenzy, AI, COVID-19 vaccines, and rising oil prices.
  • The bottom 5 stocks were a group including: payment processors hit by the pandemic, recent IPOs that never met expectations, and a stock that suffered with the end of lockdowns.

The top stock of 2021 is video-game retailer GameStop Corp. (GME), whose shares provided a YTD total return of 815.0% through Dec. 3. The worst-performing stock this year is financial-technology (fintech) firm StoneCo. Ltd. (STNE), which provided a YTD total return of -81.8% over the same period. For comparison, the Russell 1000’s YTD total return was 20.5%.

The top stocks have been driven by a number of different themes this year. The “meme stock” frenzy early in the year sent a number of heavily-shorted stocks, like GameStop, soaring. AI and COVID-19 vaccines have helped boost two of the other top five stocks, and rebounding oil prices have driven the shares of the last two of the top five.

As for the bottom five stocks, two were payment processors that suffered significant drops in business during the pandemic, two had relatively recently gone public and never managed to meet expectations, and one, Peloton, suffered as the pandemic conditions that had driven its stock up began to ebb. All five suffered from disappointing earnings results.

Top 5 Stocks of 2021

1. GameStop Corp. (GME)

  • Year-to-Date Return: 815.0%
  • Sector: Consumer Discretionary
  • Market Cap: $13.2 billion

GameStop is a retailer of video games and other entertainment products. It operates both e-commerce and brick-and-mortar stores under the names GameStop, EB Games, and Micromania throughout the U.S., Canada, Australia, and Europe. Its products include video game hardware and accessories, software, and collectible items. GameStop reported a net loss of $61.6 million on net sales of $1.2 billion in Q2 of its 2021 fiscal year (FY), the three-month period ended July 31, 2021. Sales were 25.6% higher than the same quarter last year when its net loss was $111.3 million.

GameStop’s stock skyrocketed early in the year as Reddit users on the r/wallstreetbets subreddit forum encouraged retail traders to initiate a short squeeze on the stock. A short squeeze happens when a heavily-shorted stock rises unexpectedly, forcing short sellers looking to cut their losses and close out their positions by buying the stock, which pushes the price higher. Stocks of other heavily-shorted stocks such as AMC Entertainment Holdings Inc. (AMC) and Blackberry Ltd. (BB) also rose sharply amid the so-called “meme stock” phenomenon. While GameStop’s stock has retreated from the highs it reached earlier in the year, it is still up considerably since the start of the year, making it the top stock of 2021.

 2. Upstart Holdings Inc. (UPST)

  • Year-to-Date Return: 321.1%
  • Sector: Financial Services
  • Market Cap: $14.1 billion

Upstart Holdings is a lending platform that uses AI to assess the credit worthiness of potential borrowers. Upstart uses machine learning to look at more variables than normal credit-risk assessments, which it says will allow banks to lend to more borrowers with less risk due to the increased accuracy of this method. Upstart posted net income of $29.1 million on revenue of $228.5 million in Q3 FY 2021 ended Sept. 30, 2021. This was a 201% increase in net income and 249.5% increase in revenue year-over-year (YOY).

Upstart’s shares have exploded since they first began trading on the Nasdaq following the company’s initial public offering (IPO) in December 2020. One of the primary factors driving the sharp rise is the company’s strong fundamentals: it is profitable and growing fast. But another factor is that its business model is centered on AI, one of the top investment themes of late.

3. Moderna Inc. (MRNA)

  • Year-to-Date Return: 193.6%
  • Sector: Healthcare
  • Market Cap: $12.4 billion

Moderna is a clinical-stage biotechnology company focused on the discovery and development of messenger RNA (mRNA) therapeutics and vaccines. It develops mRNA medicines for infectious, immuno-oncology, rare diseases, cardiovascular diseases, and autoimmune diseases. Its development pipeline has 23 current programs, 15 of which have entered clinical studies. Moderna reported net income of $3.3 billion on revenue of $5.0 billion in Q3 FY 2021, which ended Sept. 30, 2021. The net income was a significant improvement from the net loss of $233 million reported a year earlier. Revenue was up nearly 32 times YOY.

Moderna’s soaring sales and shares over the past year have been driven by the success of its vaccine against COVID-19. The vaccine received emergency use authorization (EUA) by the U.S. Food and Drug Administration (FDA) in December 2020. It was the second COVID-19 vaccine to receive the approval, after the vaccine developed jointly by Pfizer Inc. and BioNTech SE received the EUA approval earlier that same month. The company generated its first profit early in 2021 as revenue soared on sales of the vaccine, its first product to receive FDA approval.

4. Devon Energy Corp. (DVN)

  • Year-to-Date Return: 175.3%
  • Sector: Energy
  • Market Cap: $28.3 billion

Devon Energy is an oil and natural gas exploration and production (E&P) company. It owns a portfolio of assets located in the U.S. and is primarily engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs). Devon Energy posted net income of $839 million on revenue of $3.5 billion in Q3 FY 2021 ended Sept. 30, 2021. Net earnings improved significantly from the net loss of $91 million in the same quarter last year, with revenue having risen 224.8% YOY.

Shares of Devon Energy have received a massive boost this year from investor optimism over the entire energy sector amid surging oil prices which rebounded from last year’s pandemic-depressed lows. The rise in oil prices has boosted profits for oil producers.

Unlike in past cycles, many oil and gas companies are returning profits to shareholders rather than investing in future growth. Devon Energy has been rewarding its shareholders with variable dividends as the company pulls back on its capital expenditures, which is attracting some investors that have not traditionally invested in the energy sector.

5. Continental Resources Inc. (CLR)

  • Year-to-Date Return: 167.1%
  • Sector: Energy
  • Market Cap: $15.7 billion

Continental Resources is an oil and gas E&P company. It is the largest leaseholder and among the largest oil producers in the Bakken oil field region of North Dakota and Montana. The company operates throughout the North, South, and East regions of the U.S. Continental Resources reported net income of $369.3 million on revenue of $1.3 billion in Q3 FY 2021 ended Sept. 30, 2021. It was a significant improvement from the net loss of $79.4 million in the year-ago quarter as revenue expanded 93.7% YOY.

Like Devon Energy, Continental Resources is benefitting soaring oil prices that have reached highs this year not seen since 2014 as the global economy recovers from last year’s pandemic shock and supply shortages abound. Not all oil companies have benefitted to the same extent. Some have lost out on the prices rises due to having hedging contracts to protect against another crash in prices. Continental Resources, however, was nearly unhedged, allowing it to take advantage of the rapid rise in oil prices.

Bottom 5 Stocks of 2021

1. StoneCo Ltd. (STNE)

  • Year-to-Date Return: -81.8%
  • Sector: Technology
  • Market Cap: $4.7 billion

StoneCo is a Brazilian fintech firm that specializes in e-commerce and payment solutions. StoneCo reported a net loss of R$1.3 billion ($229.1 million as of Dec. 8, 2021) on revenue of R$1.5 billion in Q3 FY 2021 ended Sept. 30, 2021. This was a substantially worse result than the R$249.2 million profit on only R$934.3 million in revenue a year earlier.

One big reason StoneCo’s shares have plummeted this year is that the company offers payments solutions in Brazil, a country where many businesses have been closed due to the pandemic and e-commerce only accounts for about 3.2% of total retail spending. Disappointing earnings results in the third quarter sent the stock tumbling. Adjusted earnings fell short of analyst estimates as the company struggled with higher funding costs and operating expenses. Compounding its difficulties, the company has had to halt lending due to excessive growth in bad loans. StoneCo expects to resume lending by Q1 of next year.

2. C3.ai Inc. (AI)

  • Year-to-Date Return: -78.6%
  • Sector: Technology
  • Market Cap: $3.1 billion

C3.ai is an enterprise AI software provider. It offers a suite of tools for developing, deploying, and operating large-scale AI, predictive analytics, and Internet of Things (IoT) applications. C3.ai reported a net loss of $56.7 million on revenue of $58.3 million in Q2 FY 2022 ended Oct. 31, 2021. While this represents revenue growth of 40.9% YOY, net losses widened by a considerably larger 279.7%.

C3.ai’s stock has been a big disappointment since its December 2020 IPO. The stock closed its first day trading up by more than 120%. Weeks after its debut at an IPO price of $42 per share, the stock traded as high as $183.90 at one point. But it has generally fallen ever since. Much of the stock’s troubles are related to a failure to impress investors with earnings reports. In Q1 FY 2022, the company missed analysts’ earnings expectations, reporting a quarterly loss per share of $0.37 versus analysts’ expectation of a $0.28 loss per share. In the company’s Q2 FY 2022, customer subscription revenues came in lower than expected. The stock hit new lows following the report.

3. Paysafe Ltd. (PSFE)

  • Year-to-Date Return: -77.6%
  • Sector: Technology
  • Market Cap: $2.4 billion

Paysafe is a U.K.-based payments platform that offers payment processing, digital wallets, and online cash solutions. The company connects businesses and consumers across 70 payment types in more than 40 currencies around the world. Paysafe reported a net loss $147.2 million on revenue of $353.6 million in Q3 FY 2021 ended Sept. 30, 2021. This represents a revenue drop of nearly 1% YOY and while net losses increased by 280.9%.

Shares of Paysafe, which went public through a special purpose acquisition company (SPAC) merger in late March 2021, have failed to attract investor optimism and have continued to all throughout the year. The company’s earnings reports have not helped. Its shares fell sharply after the company reported Q3 guidance in its Q2 FY 2021 earnings report that fell short of analysts’ expectations. The stock plunged again after Paysafe reported Q3 sales that missed estimates and revised its full-year outlook downward.

4. GoHealth Inc. (GOCO)

  • Year-to-Date Return: -74.9%
  • Sector: Financial Services
  • Market Cap: $1.1 billion

GoHealth is a health insurance marketplace and Medicare-focused digital health company. Its proprietary technology platform leverages machine-learning algorithms that analyze insurance behavioral data in order to help individuals find the best health insurance plan for their specific needs. GoHealth reported a net loss attributable to its shareholders of $20.2 million on revenues of $211.7 million in Q3 FY 2021 ended Sept. 30, 2021. The net loss attributable to the company’s shareholders was narrower than $56.4 million loss the previous Q3. Revenues rose 29.6% YOY.

Investors and analysts have expected significantly more from GoHealth. Its shares have plummeted more than 80% from its July 2020 IPO price of $21 per share. The company’s failure to meet earnings estimates over the past four quarters is not helping boost investor optimism for its stock price. In the latest quarter, GoHealth’s losses per share came in $0.18, double the $0.09 that analysts had expected.

5. Peloton Interactive Inc. (PTON)

  • Year-to-Date Return: -71.3%
  • Sector: Consumer Discretionary
  • Market Cap: $14.4 billion

Peloton Interactive is an interactive fitness platform with a community of more than 5.9 million members, as of June 30, 2021. It offers connected fitness equipment, including fitness bikes and treadmills. The company also offers subscriptions to its digital fitness platform that connects to its fitness equipment. Peloton posted a net loss of $376.0 million on revenue of $805.2 million in Q1 FY 2022 ended Sept. 30, 2021. The net loss was significantly worse than the $69.3 in net earnings reported a year earlier. Revenue rose 6.2% YOY.

Whereas some stocks on this bottom 5 list were hurt by the pandemic, Peleton was hurt by 2021 partial return to normalcy. Its stock soared as the pandemic kept people indoors leading to a rise in the popularity of connected fitness. But with demand for the company’s products has cooled off this year and supply chain disruptions are leading to rising costs. In its latest earnings report, Peloton indicated that quarterly subscriber growth was the slowest it has been since the company went public two years ago. It lowered its full-year forecast for its 2022 fiscal year, which ends June 30.

The Bottom Line

The top stock of 2021 was video-game retailer and meme stock GameStop and the bottom stock of 2021 was Brazilian fintech firm StoneCo. Gamestop was an anomaly among the top 5 stocks, being a retailer, but was bolstered by becoming a huge social media sensation. The others were either in fast-growing sectors, like AI firm Upstart or firms that benefitted from economic recovery such as oil companies Devon and Continental. Moderna, a biotech firm and a provider of one of the vaccines aiding the recovery, was both.

Out of the bottom stocks, two, StoneCo and Paysafe, were payment processors whose businesses have suffered tremendously due to the pandemic, and two more, GoHealth and C3.ai had gone public fairly recently in the IPO boom of the last 2 years and failed to meet expectations. The appeal of Peleton’s products was diminished with the lifting of lockdowns bringing its stock down to round out the bottom 5.