EToro's Investment Office Quarterly Overview
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eToro’s Investment Office
Quarterly Overview
Q4 2020
02: An update from our CIO
03: Investor Consensus Survey
06: Investment Themes:
Is the Tech Growth Story Over?
09:Value Investors on eToro
Who they are and how you can Become One
12: S
ingle Assets: Throughout 2020,
many records were broken
Dear eToro investors,
The final quarter of 2020 was a lively period for investors. Early in the quarter,
investors were in a hesitant mood due to the uncertainty in relation to the
outcome of the US presidential election. Rising Covid-19 cases across the world
also held investors back. In November, however, sentiment towards equities
improved significantly. With Joe Biden comfortably winning the US election and
Pfizer announcing that it had created a coronavirus vaccine, investors rushed to
buy stocks. November was the best month for global equities since 1988 with
the MSCI World index gaining 12.6%. In December, US stocks hit new all-time
highs on the back of vaccine approvals, despite rising cases of the coronavirus
in many countries.
Throughout the quarter, many of the sectors that were hit the hardest by
Covid-19, such as energy, financials, industrials, and travel, delivered strong
gains. The energy sector, for example, posted a gain of 30% in November alone.
Green energy stocks also outperformed on the back of Joe Biden’s win. Climate
policy is one of the pillars of the Biden administration and in the next 10 years,
the president-elect plans to spend nearly $2 trillion on renewable energy. This
should provide tailwinds for companies that operate in the green energy space.
Looking at 2021, we expect the global economy to recover from the coronavirus
pandemic as vaccines are distributed around the world. Currently, the
Organization for Economic Cooperation and Development (OECD) expects
growth of 4.2% for the year ahead, however, some economists believe growth
will be substantially higher. Much will depend on the speed of vaccine rollouts.
This healthy level of economic growth should provide a nice backdrop for equity
markets.
While mega-cap technology stocks such as Amazon and Apple were the star
performers in 2020, we believe the rally is likely to broaden to other areas of
the market in 2021. This could favour mid-cap and small-cap companies.
Given that we remain in the midst of a technology revolution, we think up-and-
coming disruptive tech companies operating in areas such as cloud computing,
payments, 5G, and HealthTech look well placed to deliver gains for investors.
Of course, risks remain. Until we see mass vaccination for the coronavirus –
which is not likely to be fully achieved in the first half of 2021 – the pandemic is
likely to continue to present challenges for some companies, particularly those
that are not fully digital. Realistically, we are likely to see periods of stock market
volatility in 2021. Overall, however, we are confident in relation to the outlook for
equity markets and expect positive returns.
I wish you all the best for the quarter ahead.
Gil Shapira
Chief InvestmentOfficer
2 eToro’s Investment Office Overview | Q4 2020
QUARTERLY SURVEY
Investor Consensus
According to our Popular Investors community, we generate eToro's unique view
on the most burning topics impacting capital markets.
Looking back into the last quarter of 2020, the race for a COVID19 vaccine
(33%) and US presidential elections (25%) were the dominant trend setters to
consider while optimising one’s portfolio throughout Q4. Looking toward the
first quarter of 2021 and considering that the vaccine rollout has already started
and distribution will be efficient (27%), investors are looking into economic
recovery and see further stimulus plans (47%) as a key factor to determine
the path the global economy will take and with it the reaction of capital markets.
The US equity market (56%) and specifically the technology sector (53%)
remain the favorite place for investors to look for potential upside, while
European equities are the least favorable to perform (6.5%), continuing the
trend seen throughout 2020. Energy might also be an attractive sector (17%)
and this time it's not all about the oil recovery we have seen during Q4 of 2020,
but also the strong run by companies that are active in the Renewable Energy
sector, on the back of Joe Biden’s win and the rising demand for sustainable
related investments.
On a global perspective, the view on the equity markets remains neutral (45%)
however we are seeing growing pessimism as more and more investors are
concerned over a potential bearish (38%) equity market (compared with 14% in
the previous quarter).
ESG and sustainability are becoming a crucial factor to consider in decision
making. 67% of investors incorporate ESG and/or other sustainability factors
into their research process. This is aligned with the global rising awareness in
demand for ESG as part of long term investment strategies.
The world's most traded FX pair, EUR/USD, continues to challenge investors as
we tried to establish a view as to where the pair is going to be over the next
quarter. 38% see the pair trading above 1.2000 while 34% do not have a clear
view as to potential levels. Gold in the meanwhile sees a stronger consensus
as 38% believe the precious metal will return to the $2,000 levels we have seen
throughout the year and 31% see it remaining in the current levels.
3 eToro’s Investment Office Overview | Q4 2020
1: What event had the biggest impact on
your portfolio in the last quarter?
12%
34%
12%
Race for Covid-19 Vaccine
U.S. Election Results
Corporate Earnings season 17%
Other
25%
Crypto Currency Rally
2: Which do you think will have the
largest impact on your portfolio in 9%
the coming quarter?
15%
Possibility of continued central bank stimulus to
48%
struggling economies
Efficiency and Distribution of a Covid-19 Vaccine
28%
President Biden's first 100 days in office
Other
3: Which equity market do you expect to
perform the best in 2021?
6.5%
8.5%
United States
Asia
28% 57%
Emerging Markets (excluding Asia)
Europe
4: Which U.S. based sector do you expect
to outperform in 2021? 5%
8%
Tech 8%
Energy
8%
Healthcare 54%
Airlines
18%
Industrial
Finance
4 eToro’s Investment Office Overview | Q4 2020
5: What is your view regarding the global
equity market over the next quarter?
9%
1%
7%
very bullish
bullish
38% 45%
neutral
very bearish
No idea
6: Which asset class do you believe will
be the best performer for 2021?
4%
13%
Equities
Cryptocurrencies
48%
Commodities
35%
Bonds
7: Are you incorporating ESG/sustainability
factors into your research?
Yes 32%
No
68%
8: Where do you believe the price of gold will be
at the end of the next quarter (currently at 12%
approximately $1800)?
17%
Higher, I see it going back to the $2000 level
39%
More or less around where it is now
No idea
Lower, gold has lost its shine 32%
5 eToro’s Investment Office Overview | Q4 2020
CopyPortfolios
Is the Tech Growth
Story Over?
News that Pfizer and Moderna have developed There is no doubt that a coronavirus vaccine will
vaccines for the coronavirus has shaken up equity benefit traditional sectors at the expense of the
markets recently. technology sector in the near term. As lockdowns
around the world are eased, and activity picks up, the
The dominant trade has been clear. Investors have revenue growth of some technology companies may
offloaded shares in the technology companies that slow.
helped the world survive the Covid-19 pandemic,
such as Amazon.com, Zoom Video Communications, What is important to understand, however, is that the
and Teladoc Health, and piled into companies in growth story associated with these kinds of technology
traditional sectors such as airlines, hotels, and oil, companies is far from over. In the medium- to long-
which were crushed during the crisis. term, the growth potential remains significant.
Covid-19 has permanently reshaped our lives
While a coronavirus vaccine will be a game-changer for society, the world is
unlikely to return to the old normal. Lockdowns have had a profound impact on
the way we live and as a result, new digital behaviours now span all areas of our It is likely that
lives, from how we shop to how we work to how we entertain ourselves. many of the digital
Looking ahead, it is likely that many of the digital habits that we have developed habits that we
during Covid-19 will stay with us and become the norm. Ultimately, the wide- have developed
scale digital adoption seen during the crisis is likely to remain in place well after during Covid-19
the pandemic is over. will stay with us
It is worth pointing out that this digital revolution is not a new phenomenon. and become the
Prior to the coronavirus, the digitisation of the global economy was already well norm.
under way. Covid-19 simply accelerated the structural shift. Looking beyond the
pandemic, the global digitalisation trend is set to continue. Consequently, many
areas of the technology sector are poised for further growth.
Online shopping is still in its early days
The e-commerce market is a prime example of an area of technology that is
set for prolific growth going forward. This year, experts predict that global retail
e-commerce sales will total $4.1 trillion. However, by 2023, total e-commerce
sales are expected to hit $6.5 trillion. That means that the industry is set to
grow another 60% or so within just three years.
6 eToro’s Investment Office Overview | Q4 2020Today, online sales still only account for around 16% of total retail sales globally.
This suggests that there is an enormous growth runway ahead for businesses e-commerce and
operating in this industry. Online retailers such as Amazon.com, eBay, and ASOS, Telemedicine are
as well as digital payments companies such as PayPal, Mastercard, and Visa are
industries that
poised for strong growth.
were growing
Investors looking for exposure to the e-commerce industry may want to consider at a fast pace
an investment in eToro’s ShoppingCart CopyPortfolio. This is a fully allocated
before Covid-19.
thematic investment portfolio focused specifically on companies that are set to
benefit from the online shopping revolution. However, the
pandemic took
them to the next
Telemedicine is the future of healthcare level.
Telemedicine is another industry that is only likely to grow in the years ahead. Like
e-commerce, this is an industry that was growing at a fast pace before Covid-19.
However, the pandemic took the industry to the next level. Within the space of
just a few months, telemedicine became fully mainstream. Pre-Covid-19, only
around 10% of Americans considered virtual health as an option. Now, that
figure stands at around 75%. Today, the global telemedicine market is worth
around $50 billion. However, between now and 2026, the market is set to
grow at a compound annual growth rate (CAGR) of about 24%. This means
that by 2026, it could be worth closer to $200 billion. This kind of market growth
is likely to provide powerful tailwinds for companies that operate in the industry
such as Teladoc Health, Humana, and CVS Health.
Video gaming is now the world’s favourite form of entertainment Having evolved
Video gaming — which boomed during lockdowns — also has enormous from a niche
growth potential going forward. Having evolved from a niche hobby to a global, hobby to a global,
mainstream phenomenon over the last decade, gaming is now one of the world’s mainstream
favourite forms of entertainment.
phenomenon
In recent years, the video gaming industry has grown rapidly, driven by over the last
advances in gaming and the growth of e-sports. Looking ahead, it is set to decade, gaming
continue growing at an incredible pace. Today, the gaming industry is worth
is now one
about $170 billion.However, by 2025, it is forecast to be worth over $300 billion.
This powerful industry growth should benefit game manufacturers such as of the world’s
Activision Blizzard (Call of Duty) and Electronic Arts (FIFA), console manufacturers favourite forms of
such as Nintendo and Sony, as well as graphics card developers such as Nvidia. entertainment.
Those looking to invest in video gaming may want to check out eToro’s InThe
Game CopyPortfolio. This strategy provides exposure to a vast range of leading
gaming and e-sports companies.
7 eToro’s Investment Office Overview | Q4 2020Working from home is here to stay
Finally, work-from-home technology is another area of the market that is poised
for strong growth.
Technology
The coronavirus has changed the way we work forever. Not only has the
companies that
pandemic shown that technology enables employees to work from home
without disruption, but it has also shown that the work-from-home model has
operate in the
many benefits for both employees and employers. work-from-home
space such as
Looking ahead, the work-from-home trend is only likely to accelerate.
According to research firm Gartner, over 40% of employees are likely to work
Zoom Video
from home at least some of the time in the future. Meanwhile, nearly 75% of Communications,
organisations plan to shift some employees to remote work permanently in the Microsoft, and Slack
near future. still have plenty of
As a result of this trend, the video conferencing market is expected to growth potential.
grow at over 20% per year between now and 2026, while the collaboration
software market is expected to grow at an annualised rate of 13% between
now and 2027. This means that technology companies that operate in the work-
from-home space such as Zoom Video Communications, Microsoft, and Slack
still have plenty of growth potential.
Investors looking to capitalise on this trend may want to consider eToro’s
RemoteWork CopyPortfolio. This strategy offers exposure to a wide range of
technology companies that are helping employees work from home.
Tech stocks: buying opportunities are emerging
In summary, many of the technology-based investment themes that
outperformed during Covid-19 continue to have strong long-term growth
prospects. These themes and companies may experience slower top-line
growth in the near term as lockdowns ease. However, over time, they are likely to
generate substantial growth as they will benefit from structural shifts in the way
we live, work, and communicate.
With many investors currently shunning these technology stocks on the back
of the vaccine news, some compelling buying opportunities are beginning to
emerge for long-term investors.
Sources:
https://www.statista.com/statistics/379046/worldwide-retail-e-commerce-sales/
https://www.smartinsights.com/digital-marketing-strategy/online-retail-sales-growth/\
https://www.fool.com/investing/2020/10/11/the-top-2-telemedicine-stocks-to-buy-in-october/
https://www.medgadget.com/2020/10/telemedicine-market-2020-size-share-growth-rate-covid-19-impact-on-business-trends-healthcare-sector-
regional-outlook-competitive-landscape-and-global-forecast-to-2026.html
https://www.grandviewresearch.com/industry-analysis/video-game-market
https://www.gminsights.com/industry-analysis/video-conferencing-market
https://www.marketwatch.com/press-release/covid-19-impact-on-global-collaboration-software-market-size-status-and-forecast-2020-2026-2020-05-07
8 eToro’s Investment Office Overview | Q4 2020POPULAR INVESTOR
Value Investors on eToro:
Who they are and how you
can Become One
‘’Value investors buy
businesses not stocks’’
Benjamin Graham
Value investing is an investing philosophy first developed by Benjamin Graham and
David Dodd in the 1930s, which focuses on buying stocks that trade below their
fundamental value.
Although all investment styles seek to buy something low and sell high, the value Value investors
investing model is based on a few very important principles:
buy business not
1. Business owners — Value investors buy business not stocks, stocks are a stocks.
tool to buy a piece of the company.
They base their
2. Value vs Speculation — Value investors do not base their decisions on
decisions on deep
speculative assumptions, they base their decisions on deep quantitative and
qualitative research for every company they buy.
research and invest
for the long-term.
3. Long term thinking — Most of the market invest in the stock market based
on speculation with intention to make fast and ‘easy’ money, Value Investors Value investors will
invest for the long-term, they do not check what the investment is doing today seek to pay low
or tomorrow but in 3-5 years, some even buy and hold companies forever!
prices for good
4. Margin of safety — Value Investors will seek to pay low prices (usually low growing business
multiples) for good growing business, the idea is that the stock market is not and will be very
a safe place and like any place that is not safe we have to be cautious and
patient until they
limit the down side risk. That requires value investors to be very patient and
pass many ideas until they find the right one. Some even waited a few years
find the right
before making their investment! investment.
9 eToro’s Investment Office Overview | Q4 20205. Volatility and human behavior — The markets are very volatile on a minute The value investor
by minute base. That leads most investors to take actions based on emotions
will buy more
“Greed and Fear” which in return (on average) causes many investors to lose
money in the long-term. Value Investors concentrate on the companies
shares even if the
financial reports and not on the daily share price. company went
down by 50% if
a. Value Investors see volatility as an opportunity to take advantage when
the market is in mania or depression. i.e. The value investor will buy
he believes the
more shares even if the company went down by 50% if he believes the fundamental
fundamental value did not change, this is in contrast to many investors value did not
that may panic or sell. change
Who is a Value Investor on eToro
A Value Investor on eToro is a Popular Investor that adheres to the principles outlined above. The Popular
Investor team identifies potential Popular Investors with such strategies and then has a consultant (@Benoak,
Mati Alon, a professional long-term value investor) discuss with them how they analyse stocks and construct
their portfolio.
Note that recognition of a Popular Investor as a Value Investor, such as a stamp being provided is not an
endorsement to copiers or a recommendation by eToro and is simply for informative purposes.
Coping a Value Investor on eToro
eToro takes all types of investing very seriously and as such we have
decided in recent months to invest some resources and empower the
value investing method.
To succeed in this investment strategy we believe the copiers should invest with
COPY
a few principles in mind.
1. Consider committing capital for the long term — no less than 12months.
2. Do not judge the Popular Investors results based on a daily or monthly
portfolio change rather on a 3-5 years investment horizon. This is not to Understand that
state that results are guaranteed at the end of this period, but rather simply
every company
to set expectations that unrealized losses and profits can be experienced
over such a timeframe.
the Popular
Investor buys has
3. Understand that every company the Popular Investor buys has a real value
a real value and
and deep analysis and thought behind it.
deep analysis and
4. Look at this investment as a long term endeavour and not a quick money thought behind it.
making strategy.
5. You can identify a value investor in the bio or via the feed.
10 eToro’s Investment Office Overview | Q4 2020Here are some Are you interested in establishing yourself as a Value
examples of Popular
Investor on eToro?
Investors who meet
many of the above In order to establish yourself as a Value Investor on eToro, you may wish
criteria to consider doing the following:
1. Write detailed analysis for every holding you have and share it with the
Popular Investor Team: popularinvestor@etoro who can pin this analysis on
the relevant instruments feed.
2. Once every 6 months update and review this analysis
3. Update your followers at least twice a month about your positions and
relevant updates.
4. Apply for the Popular Investor Program if you have not done so already.
5. Write a quarterly update for every holding you have after the earning reports
are published.
6. Make sure to acknowledge in other social media communities your eToro
@lordfoofoo activity, such as Linkedin, Twitter and relevant Facebook groups.
7. Commit to quarterly youtube updates, zoom/live video conference calls with
followers/copiers/community. To summarize the Q and what do you think
about the markets and your portfolio.
Think about whether all your investment decisions are research based
or not.
• Consider keeping your holding period to a specific standard.
@georgech89 • Be careful about adjusting your strategy and consider whether having
exposure to speculative asset classes such as FX, Bitcoin or commodities are
a reflection of a true value investor strategy.
Now you have become a Value Investor on eToro, what will you get out
of this?
• Potential growth and retention of AUM on platform.
• Exposure as a well regarded and visible Popular Investor, research analyst
@ccalle and value investor in the eToro community.
• Free access from the Popular Investor team to world leading research and
analyst tools.
• Personalised feedback from Mati Alon (Value Investor and eToro consultant).
• We will pin your posts on the instrument pages for companies you analyze
providing you more visibility and a reputation for being thought-leaders of
certain companies.
• Official recognition by eToro as a Value Investor.
@lucapaccioli
Sources:
https://www.etoro.com/news-and-analysis/copytrader/etoro-value-investors/
11 eToro’s Investment Office Overview | Q4 2020SINGLE ASSETS
2020 —
A record-breaking
year
When one door closes, another opens: Turning Crisis Into Opportunities
History shows that when equity markets generate strong returns of more than
In the space of
20% in a year, the returns in the following year are often more modest. Therefore,
after the S&P 500 and NASDAQ 100 returned 29% and 38% respectively in
less than three
2019, the consensus among analysts at the start of 2020 was that equity market weeks, US stocks
returns for the year were likely to be less impressive. plummeted into
The positive momentum seen in 2019 actually continued into 2020 with stock
bear market
prices climbing strongly in the first half of January. However, in February, the territory.
outlook changed dramatically when the coronavirus began to spread globally,
However, in late
forcing countries to go into lockdown. With 2020 earnings forecasts quickly
becoming obsolete due to the severe disruption caused by the outbreak, March, investors
investors panicked and sold stocks aggressively. In the space of less than three began coming
weeks, US stocks plummeted into bear market territory, bringing the longest bull back into the
market in history to an abrupt end. market.
The bear market did not last for long though. In late March, investors began coming
The equity
back into the market in a bid to capitalise on the fantastic buying opportunities on
offer. And from there, equity markets staged an amazing recovery which lasted
markets recovery
throughout the year and received an extra boost in November when Pfizer received an
announced that it had developed a Covid-19 vaccine. US stocks ended the year extra boost
higher, As of December 18th the S&P 500 index was up 14.8%, while European in November
stocks ended marginally lower, with the Stoxx Europe 600 index down 4.8%.
when Pfizer
Throughout 2020, many records were broken. Early in the year, we saw the announced that it
fastest bear market in history as well as volatility levels not seen since the Global had developed a
Financial Crisis. Meanwhile, later in the year, we saw the Dow Jones Industrial
Covid-19 vaccine.
Average index cross the 30,000 points mark for the first time in history, and the
S&P 500 hit an all-time high of over 3,700 points.
12 eToro’s Investment Office Overview | Q4 2020eToro’s most popular stocks in 2020
Trading volumes at eToro rose across the board in 2020 as investors took
advantage of the high level of stock market volatility. One stock with exceptional
volumes, however, was Tesla. It showed the highest trading volumes on the
platform with roughly four times the volume of the second most traded stock,
Nio Inc, which has been called the ‘Tesla of China.’
Both Tesla and Nio produce electric vehicles, but they began the year in very
different places. Tesla’s market cap was just over $75 billion at the beginning
of 2020 and investors were expecting the company to continue growing. By
contrast, Nio’s market cap was just $4.2 billion, and investors were concerned
that the company was burning through too much money. In the end, we saw
phenomenal returns from both stocks – Nio with a enormous 1062% year-to-
date return and Tesla with a 730% year-to-date return. Now that Tesla’s market
cap is over $500 billion, it has been included in the S&P 500 index. Moreover, it is
one of the top 10 largest stocks within the index.
Looking beyond Tesla and Nio, the most popular stocks on eToro in 2020 were
mainly large technology companies. All of the mega-cap tech stocks such as
Apple, Amazon, Microsoft, Alphabet, Facebook, and Alibaba were among the
most traded stocks on the platform. These companies all benefited from the
acceleration of digital trends in 2020. Amazon, for example, enjoyed huge growth
in both its online shopping and cloud revenues during the year. Microsoft,
meanwhile, benefitted from the work-from-home trend and the growth of video
gaming. Pharmaceutical giant Pfizer was also one of the most popular stocks
on the platform in 2020. It was the first to announce that it had developed a
Covid-19 vaccine.
Opportunities in 2021
Here at eToro, we are looking forward to 2021. Optimism towards equity markets is rising, and this year has
been a good reminder that even when markets fall sharply, losses are eventually erased by bull market gains.
Warren Buffett once said: "All there is to investing is picking good stocks at good
times and staying with them as long as they remain good companies."
With thousands of stocks on the eToro platform today, and many new stocks and ETFs set to come
on to the platform in 2021, we think there will be plenty of opportunities for investors to pick ‘good
stocks’ in the year ahead.
13 eToro’s Investment Office Overview | Q4 2020eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies,
as well as trading CFD assets. Your capital is at risk. CopyPortfolios™ is a portfolio
management product of eToro EU. CopyPortfolios™ should not be considered as
exchange-traded funds, nor as hedge funds.
Zero commission means that no broker fee has been charged when opening or closing
the position. Other fees may apply. For additional information regarding fees, click here.
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