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Why these 3 ASX shares smashed it in 2020

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In a year where the S&P/ASX 200 Index (ASX: XJO) just broke even, it’s worth having a look at shares that outperformed, and outperformed strongly.

These 3 ASX shares have smashed it out of the park this year, and here’s why.

Xero Limited (ASX: XRO)

One of Australia’s ASX darlings, Xero has steadily climbed its way from $80 a share at the end of 2019, to $145.63 at the time of writing — an impressive 82% return for the year.

Back in March, the workforce collectively gave up the daily commute for a short walk to their new home desk. Many businesses were forced to adopt a cloud-based environment. For many companies, it meant expanding upon their existing licenses for cloud-based software.

Xero was well placed for this shift, with the company now commanding a 2.453 million subscriber strong base (adding 396,000 new subscribers, year over year).

As reported in the company’s first half FY21 results, annualised monthly recurring revenue grew by 15% to $877.6 million, earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 86% to $120.8 million, and net profit after tax skyrocketed to $34.486 million from $1.366 million the previous year.

Xero’s market capitalisation is $21.36 billion at the time of writing.

Mineral Resources Limited (ASX: MIN)

Not quite the size of Fortescue Metals Group Limited (ASX: FMG), Mineral Resources is often forgotten. Yet, the company has had a remarkable run of its own this year. The Mineral Resources share price has rocketed from $16.50 at the end of 2019 to $36.65 at the time of writing — that’s a 122% return.

Iron ore prices this year have marched forward with no reprieve. This is reflected in Mineral Resources’ reported revenue of $2.1 billion, up 41% on FY19. Where the numbers really start to shine in its annual report to shareholders is the net profit after tax – up from $165 million in 2019 to $1,002 million this year.

A couple of weeks ago UBS also initiated coverage on Mineral Resources with a “buy” recommendation, stating “MIN offers exposure to a growing mining services business and attractive commodities exposure to iron ore and lithium.”

Mineral Resources’ market capitalisation is currently $6.91 billion, while Fortescue Metals Group is $73.83 billion.

Lynas Rare Earths Ltd (ASX: LYC)

Passed up by Wesfarmers Ltd (ASX: WES) late last year (after the conglomerate originally offered a takeover bid of $1.5 billion), the Lynas share price lost its lustre and began to fall in early 2020. After kicking the year off at $2.29 a share, the Lynas share price fell as low as $1.065 in March. However, it has clawed its way back. Today Lynas shares are trading for $3.95 – a 71.88% return for the year.

The strong rally this year could be attributed to the ongoing trade tensions with China. Given Lynas is a rare earths supplier outside of China, it has positioned itself as an alternative.

Despite the company’s falling revenue and EBITDA, a 16% and 40.6% decline, respectively, the market appears to be focused on the long-term trend towards a higher demand for rare earth metals.

However, Lynas was recently downgraded to a “neutral” by UBS, which believes the rising electric vehicle market has already been priced into the current Lynas share price

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*Returns as of February 15th 2021

Mitchell Lawler owns shares of Lynas Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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