Why it’s so hard to pick stocks

On Monday, 9 November, pharmaceutical giant Pfizer announced, along with its partner, BioNTech, that they had a viable vaccine for Covid 19, the virus that in the last year has infected over 60 million people, killing over 1.5 million of them, made tens of millions of people unemployed and effectively shut down the global economy. They have saved the world from a pandemic that hadn’t impacted the world for the last 100 years.

Since that announcement, Pfizer’s stock price is up 20.9% and up 12.5% year to date. BioNTech, which is a much smaller company, is up 39.8% since the announcement and a whopping 334% year to date.

Comparison since 06 November 2020

While BioNTech created the vaccine, they are too small to be able to carry out the required tests and manufacture and distribute the amount of doses needed. Pfizer is the company that is going to ensure that the worlds get the doses needed for life to get back to normal. So, how do they compare to other random stocks that I have on the Stocks app on my phone

  1. Apple: +3.8%
  2. Starbucks: +16.26%
  3. Wendys: -0.001%
  4. Nike: +6.7%
  5. Amazon: -6.34%
  6. Exxon Mobile: 34.26%

The struggling oil giant outperforms the pharmaceutical company as airlines will increase flying as a result of Pfizer’s vaccine. Otherwise, the global coffee shop chain that has had reduced sales for the year has been the closet performer to Pfizer in the last month.

Year to date comparison

Taking all that has happened this year, I thought it would be a good idea to have a look at the returns if you invested in the same stocks on 2 January when the markets first opened in 2020.

  1. Apple: +64.12%
  2. Starbucks: +17.95%
  3. Wendys: -1%
  4. Nike: 34.62%
  5. Amazon: 63.4%
  6. Exxon Mobile: -37.9%

We can see some big swings in stock prices between one month and almost one year. The problem is, it is impossible to know if you are buying Exxon at the start of a +34% run or are you at the beginning of a -37% slump.

Invest in the market

What if you just invested in the market as a whole? At Bluewater, we believe that markets work and they are the best mechanism to calculate the value of an asset. We also believe in diversification and that it is impossible to know which will be the top sector or fund in any one year so we favour capturing the market as a whole and not just individual stocks. How would you have gotten on if you had just invested in the market this year instead of trying to pick out individual stocks?

  1. S&P 500: This index is up 4.7% since 06 November and up 12.9% year to date
  2. MSCI World Index: This index is up 6.8% since 06 November and up 11.5% year to date

If you had invested in the American market this year, you would have earned more that the company that is going to save the world! If you reduced your risk exposure by increasing your diversification across the world instead of just one stock, you would have earned just 1% less. That’s €10 for a €1,000 investment.

It’s really hard to invest and impossible to get your timing right. You are better to invest in the market as a whole than take a gamble on one or two stocks, especially over a short period of time.


If you have any questions, drop me an email at steven@bluewaterfp.ie


Steven Barrett

14 December 2020