Discussions about the fate of “lockdown winners” are starting to feel a little dated now that concerns about the momentum of names like Zoom Video Communications (US:ZM) have morphed into something much broader. With inflation soaring and central banks cranking out higher interest rates, it seems we worry less about whether tech names borrowed growth from the future in lockdown and more about how much intrinsic value there now is in the classic growth stocks. Accordingly, a follow-on question is whether investors should reposition their portfolios.
People have all manner of different answers to such questions, but a little context can be instructive. It’s worth assessing how some of the funds viewed as lockdown winners have fared over the course of the pandemic so far – and whether the volatility of the past half year or so has managed to erase those previous gains.
Many leaders of 2020 would likely position themselves as champions of innovation – think Baillie Gifford portfolios such Pacific Horizon Investment Trust (PHI), Scottish Mortgage Investment Trust (SMT) and Edinburgh Worldwide Investment Trust (EWI), alongside similar open-ended funds. Think also Allianz Technology Trust (ATT), Biotech Growth Trust (BIOG) and Invesco CoinShares Global Blockchain UCITS ETF (BCHS). Separately some China and gold funds made big 2020 returns, as did other names such as JPMorgan Japanese Investment Trust (JFJ).
Considering how the investment case for such names might have changed is especially important when you weigh up your current level of conviction. But it’s worth noting that many are still sitting on gains from the past two years or so, thanks to the massive returns from 2020.
Forgive my hindsight-induced market timing, but if you had invested £1,000 in the names mentioned above at the start of 2020, you would still be sitting on rich gains in most cases. Edinburgh Worldwide investors would be sitting on £997.46 as of 29 April 2022, with Biotech Growth Trust shareholders on £900. JPMorgan Japanese has seen its wins dwindle notably, with that initial £1,000 only growing to £1,038.46 as of late April. But for others the big earlier gains are yet to fully diminish, in part because 2021’s performance wasn’t really so bad. Pacific Horizon has navigated China’s difficulties well, and £1,000 invested at the start of 2020 would have grown to an impressive £2,213 at the end of April 2022. Scottish Mortgage backers would still be sitting in £1,588.92, with Allianz Technology Trust fans not far behind.
The figures are much worse for anyone who put that £1,000 to work at the start of 2021, with all the trusts mentioned above losing money bar the blockchain exchange traded fund. An investment in Edinburgh Worldwide has nearly managed to halve over that period. It’s also worth noting that while I’ve used a lump sum for illustrative purposes, regular investments would allow you to buy into the falls and offset some of this volatility.
My point is that investors who bought into “winners” earlier in the pandemic are still sitting on some decent gains in many cases. Such context may reassure both the bulls and the bears: those sticking with likes of Scottish Mortgage may find respite in the fact that they are still in the black for now, while others may find it easier to sell if they are still banking a profit.
