Near the beginning of this year, I’d wager that most Americans thought that we’d be staring into the abyss by now, at least in terms of the point total of the Dow Jones Industrial Average. But despite the initial ravages of the novel coronavirus, the market bounced back, leading many investors to surprising profitability. But there’s another side to this narrative. That’s right, we’re going to talk about the worst performing stocks of 2020.
So long as the Dow doesn’t plummet right before we turn the page on the calendar (and that day couldn’t come fast enough), the venerable index should record a modest gain. Nothing to write home about, certainly, but far better than what we had feared earlier. However, that doesn’t mean that every sector found a contrarian catalyst during this pandemic. Indeed, there are many questions about the market’s viability moving forward.
For one thing, the Dow itself may be incurring a credibility problem. Since the 1960s, the index appears to be charting a sigmoid function, or an S-curve in business vernacular. That is, the market has passed the first two stages of slow growth and rapid expansion. Now, it appears we’re heading toward (or already in) the maturation phase. If so, this dynamic implies a correction ahead, which provides important context to the worst performing stocks of 2020.
Second, I don’t believe many market optimists appreciate the economic and societal devastation that’s just around the corner. Look, I don’t want to play the role of Debbie downer. But I also don’t want to have my head in the sand, deluding myself with present numbers on the Dow that ignore some fundamental problems. For instance, the looming eviction crisis should be cause for broader concern, not just for the worst performing stocks of 2020.
Also, let’s not forget the despair that’s filtering across the U.S. and throughout the globe. Yes, it’s exciting that some sectors appear to be pinging a recovery. But the loss of so many small businesses, along with the sudden drop in transportation-related sectors has left a hole in our economy. That’s why I’m not surprised that these companies have comprised the worst performing stocks this year.
- Globus Maritime (NASDAQ:GLBS)
- Just Energy Group (NYSE:JE)
- Ashford Hospitality Group (NYSE:AHT)
- Recro Pharma (NASDAQ:REPH)
- Independence Contract Drilling (NYSE:ICD)
- Ag Mortgage Investment Trust (NYSE:MITT)
- Farmer Brothers (NASDAQ:FARM)
To be clear, I’m analyzing companies across a wide variety of sectors using year-to-date stats from Barcharts.com. These are not necessarily the absolute worst performing stocks of 2020. Furthermore, performance can fluctuate based on multiple variables. With this write-up, we’re going to explore the other side of this crazy year and see if we can’t pick up some upside candidates for 2021.
Globus Maritime (GLBS)
At the time of writing, Globus Maritime owns the distinction of being at the bottom of worst performing stocks of 2020, down nearly 94% year to date. Furthermore, with just a few weeks remaining till the end of the year, it’s quite possible that GLBS stock will hold this ignominious crown. It’s not hard to see why.
According to Reuters, Globus “owns and manages a fleet of around five modern dry bulk vessels, that transport iron ore, coal, grain, steel products, cement, alumina and other dry bulk cargoes internationally.” Primarily, the issue is that global demand for manufacturing and construction has been generally negative. For instance, total commercial construction spending in the U.S. on an annualized basis declined from $85.2 billion in January 2020 to $82 billion in October.
When you factor in what’s happening in the U.S. to other parts of the world, you have a gloomy picture for GLBS stock. Still, that opens the door for speculation. Fundamentally, I have huge doubts about our recovery efforts. With small businesses — the engine of the American economy — struggling so badly, this winter could be a long one. Therefore, conservative investors should stay away.
Just Energy Group (JE)
Typically, utility firms are reliable bets no matter what the underlying circumstance. Simply, when people flip the switch, they expect to see light. Bad things happen when it doesn’t. And that’s especially the case with our modern world where we’re incredibly dependent on electrical power. Unfortunately, this didn’t save Just Energy Group from sitting second-to-last among the worst performing stocks of 2020.
Down slightly more than 91% YTD at time of writing, JE stock will probably keep the No. 2 slot unless some rumblings occur with the competition. Although Just Energy is in a permanently relevant market, I believe some of the impact came from the company’s exposure to the hardest-hit states from the coronavirus pandemic.
Still, if you want a fundamental case for a recovery, JE stock might fit the bill for contrarians. Let’s be clear — anytime you bet on a security that’s down more than 90%, you’re asking for trouble. However, the company’s mix of traditional and renewable energy sources could spell a reversal. In addition, the incoming administration of Joe Biden will push for clean energy, representing a just-in-time moment for Just Energy.
Ashford Hospitality Trust (AHT)
On one hand, it’s completely logical why Ashford Hospitality Trust is one of the worst performing stocks of 2020. When the Covid-19 pandemic breached our borders, the transportation and hospitality sectors were the first to plummet. Sure, vacations are fun and all but they’re not worth dying over. Hence, AHT stock suffered a severe blow in March.
As society got used to the new normal, consumer sentiment for travel returned. Generally speaking, air passenger volume improved to roughly 40% of last year’s level. However, the absurd spike in new daily coronavirus infections appears to have deflated some of this demand. Further, travel statistics show that most people prefer driving to their destination than any other method. That tells you that most folks are concerned about their health, which doesn’t bode well for AHT stock.
But on the other hand, Ashford is a real-estate investment trust that focuses on upper-scale, full-service hotels. Thus, you might expect affluence to insulate AHT. However, that hasn’t happened because as it turns out, the well-to-do also care about wellness. I’m not sure when consumer confidence toward hospitality will return, making this a questionable investment.
Recro Pharma (REPH)
For pharmaceutical firms, the novel coronavirus has been a hit-or-miss affair. Obviously, for companies that are levered to the vaccine or treatment race, life has been good. For instance, Novavax (NASDAQ:NVAX) is the top-performing equity on a YTD basis, according to Barcharts.com. But if you’re not associated with a solution for Covid-19, you’re liable to become one of the worst performing stocks of 2020.
Unfortunately, Recro Pharma finds itself in the latter category. It’s really too bad because in any other circumstance, REPH stock is an incredibly relevant investment. Specializing in oral solid dose products, Recro is an essential component of the pharmaceutical manufacturing process. But with leading coronavirus vaccines being delivered via injections, the company can’t use the pandemic as a tailwind.
In prior earnings reports, management admitted that Covid-19 disrupted the organization’s revenue channels; hence, the volatility in REPH stock. However, it’s possible that shares could be looking up at some point in 2021.
First, the worst of the pandemic could fade, giving Recro and other beleaguered firms a much-needed break. Second, demand for non-coronavirus-related products will likely recover, taking REPH out of this nightmare.
Independence Contract Drilling (ICD)
When the Covid-19 crisis started spreading across major metropolitan areas, an eerie event occurred. Bustling areas in places like New York City and Los Angeles essentially fell dead silent. Honestly, it was like watching a zombie apocalypse film, except that this wasn’t a fictional tale — it was real life. Not surprisingly, then, the oil and gas industry produced some of the worst performing stocks of 2020.
Within this ignominious list sits Independence Contract Drilling. Specializing in integrated onshore drilling services, ICD stock has been hit hard by multiple crisis. First, the energy deflation roughly around the middle of last decade took the wind out of shares. Later, the worsening U.S.-China trade war did nothing to help Independence Contract with boosting demand.
But just as relations between the top two economies of the world were thawing, the coronavirus hit. Sadly, this sank ICD stock to new, desperate lows. Frankly, I’m not sure if a comeback is possible.
Let me be clear — this isn’t about Independence as an organization. Rather, demand for oil just doesn’t exist to the levels necessary to support various fossil fuel industries.
Ag Mortgage Investment Trust (MITT)
In theory, Ag Mortgage Investment Trust should be built to withstand economic and market pressures. The company is a hybrid mortgage real estate investment trust, which combine equity REITs (that own property) and mortgage REITs (tied to mortgage loans or mortgage-backed securities). With exposure to both businesses, Ag Mortgage is basically diversified. Still, that’s little comfort to long-term holders of MITT stock.
That’s because Ag is one of the worst performing stocks of 2020, shedding 79% since the January opener. It’s not among the absolute worst, but that’s an extremely small victory. So, why didn’t the company’s hybrid exposure mitigate the fallout better?
Mainly, the coronavirus is a once-in-a-century pandemic. Further, it came at a time when politically, the U.S. has never been more fractured in the modern era. Therefore, government officials had trouble courting the public trust. Invariably, the crisis worsened, leading to terrible economic outcomes.
Personally, I’d like to see MITT stock move higher because shares in many ways represent a real-time economic barometer. However, with an eviction crisis looming and businesses everywhere trying to keep the lights on, I’m not optimistic.
Farmer Brothers (FARM)
None of the names on this list of worst performing stocks of 2020 did anything (that I’m aware of) to directly inspire a bearish take. I hate to use a hackneyed phrase, but this is a case of “it is what it is.” With the novel coronavirus pandemic, some sectors were always going to take it on the chin. And the restaurant industry was one of those misfortunate segments.
Now, Farmer Brothers isn’t a restaurant. However, the coffee foodservice company is levered to the sector, along with high-contact establishments, such as lodgings, educational institutions and gaming/casino centers. While many customers have adapted to the new normal, electing alternative transactions such as curbside pickup, this model doesn’t benefit FARM stock because it doesn’t incentivize beverage sales.
Let’s be real – when you’re buying food, you don’t want your beverages sloshing all over the place. Besides, you can get your drinks at the grocery store for much cheaper.
Also, a worrying headwind is that Covid-19 may permanently disrupt the local coffee shop industry. If so, that’s another pressure point that FARM stock can’t afford.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.