These Stock Market Darlings Crushed It in 2020 — and They’re Just Getting Started

Past performance may be no guarantee of future results, but in a momentum-driven market, what’s worked recently often continues to work. Many of the stock market’s most powerful trends will affect companies not just for a single year, but also for a long time to come.

One of those big trends has been the push toward electric vehicles and renewable energy. Plenty of individual stocks riding that wave had big gains in 2020. Even if you prefer the diversified exposure that sector-focused exchange-traded funds offer, you could still have made some serious money in 2020.

LIT data by YCharts.

The Invesco WilderHill Clean Energy ETF (NYSEMKT: PBW) and the Global X Lithium & Battery Tech ETF (NYSEMKT: LIT) were among the top ETFs of 2020. They’re also charging ahead in 2021, riding high on the wave of interest in electric vehicles, renewable energy , and other clean-tech initiatives.

A wilder way to buy EV

The Invesco Wilderhill Clean Energy ETF tripled in value for its shareholders in 2020. It has also gotten off to a stronger start in 2021 as well, rising another 22% in just a week and a half.

The Invesco fund has a broad-based investment objective to seek out companies in any aspect of clean energy and conservation. In practice, that includes nearly four dozen companies in specific areas ranging from electric vehicles and charging infrastructure to solar energy and lithium mining. Roughly three-quarters of its stocks are U.S.-based. Top-performing holdings include Chinese EV leader NIO (NYSE: NIO), solar supplier SolarEdge Technologies (NASDAQ: SEDG), and mining company Lithium Americas (NYSE: LAC).

With an expense ratio of 0.70%, the Invesco ETF doesn’t come all that cheap. However, for those who don’t want the risk of holding smaller numbers of individual stocks — or the hassle of buying dozens of stocks to match the portfolio entirely — the fund does a good job of offering considerable exposure across the clean energy sector.

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Getting a charge out of lithium and battery stocks

The Global X Lithium & Battery Tech ETF had somewhat weaker results in 2020 than its peer here, but it still more than doubled for the year. This ETF has a much narrower focus that concentrates more on the mining, refining, and use of lithium in producing rechargeable batteries for a wide range of applications.

It’s not surprising to see a much larger proportion of the Global X ETF’s portfolio in non-U.S. companies. That’s because lithium is found in strategic locations around the world. Companies sprout up where there’s lithium to mine.

Global X got good performance from its leading stock, Albemarle (NYSE: ALB), which is a lithium supplier. Shares more than doubled in 2020 as demand for lithium soared.

Yet the ETF, which carries a 0.75% expense ratio, also undoubtedly got a huge boost from its holdings of electric vehicle leader Tesla (NASDAQ: TSLA). With its dual role both as consumer of battery supplies and producer of high-end battery technology, Tesla’s return by itself made a major contribution despite the stock being just a 5.5% holding currently. It’s also helping with the ETF’s 2021 performance, as the fund is already up almost 15%.

LIT data by YCharts.

Expect more from battery technology stocks in 2021

Electric vehicle manufacturers are just getting started in their efforts. Many upstart companies haven’t even started making vehicles yet. Even those that have a head start have a long way to go before they hit their stride.

That suggests that suppliers of key components will do well in the future. 2021 is likely to see even more success for these two ETFs and the companies inside their portfolios.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool recommends SolarEdge Technologies. The Motley Fool has a disclosure policy.