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Hello, my name is Steve Courtney. I'm a portfolio manager with QMA, and today we're going to do a brief video reviewing the 2020 performance of our US Quant Core portfolios. We'll talk about market dynamics that made 2020 such an unusual year, the impacts those dynamics had on our portfolios, and then also talk about our positioning relative to 2021 and the period forward.
Any kind of discussion about US equity markets in 2020 pretty much begins and ends with the COVID-19 outbreak. Obviously, with the introduction of the virus into the US in early 2020, the US economy was plunged into a very significant and very quick recession. Unlike other recessions, however, the COVID-19-driven recession here in the US was almost binary in its nature -- that is, it created very much clear winners and losers.
On the losing side certainly was companies in the value space, especially those companies whose businesses were closely tied to the economy. Think about materials and industrials and the like, with a reduction in demand but also difficulties on the supply side as well. Any businesses that were in the financial space, especially as credit quality became very much under pressure. And then any businesses that kind of required in-person attendance, if you will: lodging, airlines, cruise lines. On the other side, the winners were anything in large technology, and certainly anything that was oriented toward work from home or entertainment at home.
We also saw a significant jump in the fortunes, if you will, of companies in the health care and biotech sectors. This sort of binary environment had several impacts. One was a value versus growth dynamic. And in the slide we're showing here, you'll see that the growth and value dynamic was hardly a fair fight. Growth stocks significantly outperformed their value counterparts. Expensive stocks did far better than cheaper stocks, by upwards of 30%, and also extended a period of growth versus value outperformance that now is the longest it's been since 1985.
We also saw a size dynamic. Large companies significantly outperformed their smaller peers. Third effect was around quality. Companies with better profit margins, better returns, better managed companies, companies with better balance sheets, and also better management saw their performance really lag in 2020, and especially in the later part of year. The impact of these three dynamics were really felt in our portfolios. On the value side, our small tilt toward value as value became more and more attractive certainly hurt us.
On a size basis, again, the availability of more attractive stocks towards the smaller end of the market cap spectrum certainly had a negative effect. And quality, largely in the form of our missing sort of the junk rally that took place in Q4. What really kind of bounced in the market in the back half of the year were companies that had been most impacted by the outbreak -- many cases were of low quality and in many cases had negative earnings. And our quality focus sort of kept us out of those stocks and kind of prevented us from getting that big bounce that value saw in the back half of the year.
In terms of current positioning though, we think we're actually in a good place. Right now, the portfolio is of better quality when we look at returns or profit margins, and certainly cheaper when we look at valuation. So better companies that are right now trading at discounts to the overall market. We've seen a dynamic in the past -- in 2009, you know, post-junk rally where the market normalized after the downturn in 2007 and 2008. And that kind of junk rally kind of preceded a very long period of outperformance by better quality, more reasonably valued companies. We think we're set up to see a similar dynamic here in 2021, especially as we move past the impacts of COVID-19. On the other side of the ledger, we also think that there's a number of stocks here that are quite aggressively valued, I'd say. Some are very, very speculative here, with very, very high valuations without any kind of palpable underlying fundamentals. In other cases, we've got companies that are very, very strong companies that have done very, very well, very well positioned, yet the valuation of their stocks is extremely high. We think that there's sort of a Nifty Fifty situation setting up here, relative to the period back in the '60s or '70s where dominant companies got very, very high valuations. And while they continued to be dominant companies, those valuations inhibited their performance as stocks. We think that similarly here, these very much high-flying but very successful companies are at valuations which we think they'll probably have to earn into, and we expect to see their performance moderate.
In a scenario where we get continued support from fiscal and monetary policy and the economy can recover, we think a portfolio like ours today, with higher quality and better valuation, represents a good place to be in the long haul.
Thanks for your time and attention today. And as always, if you have any additional questions or want to speak with us, we're always happy to make that happen. Thanks for your time.