GRAPHIC-Retail traders leave Wall Street for dust in 2020 stocks rally

* Stocks popular with retail traders up 80% in 2020

* Platforms report record retail buying amid pandemic

* Retail investors have much less success in Europe

* Dotcom era echoes as euphoria drives shares higher

By Tommy Wilkes and Thyagaraju Adinarayan

LONDON, Dec 18 (Reuters) - Retail traders have ridden 2020's
stock market rally better than the professionals, with their
most popular picks outperforming market indexes and
well-resourced investors such as hedge funds.

Online trading platforms have reported a retail rush since
the COVID-19 pandemic hit markets in March, with near-zero
interest rates and a roaring rebound luring a new generation of
stuck-at-home traders wanting to sharpen their skills on stocks.

And while the scramble into fast-growing but highly-valued
stocks has echoes of the 2000 dotcom bubble, plentiful cheap
cash means retail traders do not yet look ready to cash in.

COVID-19 WINNERS

Record sums of central bank stimulus have turbocharged
markets in 2020, inflating asset prices, often to record levels
and particularly in U.S. tech.

Retail investors have picked the biggest beneficiaries,
including Amazon, electric vehicle makers Tesla
and Nio, as well as pharma hopefuls looking for
a break in the COVID-19 vaccine hunt.

A basket of 58 U.S.-listed stocks popular with retail
traders is up more than 80% this year, outstripping the S&P
500's 14.5% rise and a hedge fund basket's return of 40%,
two Goldman Sachs-compiled indexes show.

Amateur traders have also piled into electric truckmaker
Nikola, which is yet to sell a truck, and big lockdown
winners in exercise bike maker Peloton and Zoom.

Market veterans draw comparisons with the frenzy in
little-known internet stocks before the 2000 dotcom crash.

"Of course it's a bubble. But money is free, liquidity is
high, its never been easier to trade for retail punters, there's
no savings rate or bond yield and everyone wants the bubble to
pop," Mark Taylor, a sales trader at Mirabaud Securities, said.

AT A STRETCH

Many of the stocks retail traders have been buying look
expensive, based on the commonly-used price-to-earnings ratio.

The P/E ratio for stocks in Goldman's 'Retail Favourites'
index is deeply negative, as the companies lose money.

For the 'Hedge Fund VIP' index, the ratio is 32.

Many institutional investors have poured cash into the same
pumped-up shares, but they usually diversify.

Retail portfolios therefore have much weaker balance sheets,
as shown by the net debt to operating profit ratio for Goldman
Sach's hedge fund basket of 1.8, against retail's 4.8.

Stretched valuations and a concentration of retail investors
in some stocks, Refinitiv data shows they own 20% of Tesla
shares against 0.17% of 117-year-old Ford, could
exacerbate a selloff if confidence in ever-rising prices wanes.

EVASIVE EUROPE

In Europe, where retail share ownership tends to be lower
than in the U.S., small investors have had far less luck.

Stocks hit hard by the economic downturn are among their
most popular purchases, trading platforms told Reuters.

Heavily bought shares include Airbus and Rolls
Royce, British bank Lloyds, Lufthansa
and International Consolidated Airlines, data from Saxo
Bank, IG Group, AJ Bell, Interactive Investor and eToro shows.

Despite a vaccine-inspired rebound since November, these
stocks remain deep in the red and way off the 4% year-to-date
drop in the broader European market.

(Editing by Alexander Smith)