Top 10 Best UK Stocks to Consider in 2021
Planning to invest in the UK stocks in 2021? What UK stocks should you invest in 2021? Will 2021 be a good year to invest in the UK stock market? Which British stocks will be the best return on investment in 2021? Let’s take a look!
We all know that 2020 has been a pretty hectic year for the UK stock market and many of us are anxious about what 2021 might hold.
We’ve made it easy with our complete guide to the top 10 UK stocks to invest for 2021.
Whether you are new to investing or if you are an experienced investor, looking out and choosing the top UK shares to invest in can either be a challenge or it can seem to be a lot easier than you may think. It just comes down to your understanding of the market and knowledge of individual stocks.
2020 has been a challenging year to say the least but many companies have still benefited from such a hardship year, which is leaving many UK stocks either in a strong position as they have gained hugely over the year and looking set to continue further, or there are many stocks that are sitting in a good position but are just biding their time ready for that right time.
Realistically, the perfect time for these stocks that fit into that category is once the world starts opening up and operating within more normal times, which being optimistic doesn't seem to be that far away.
List of 10 UK Stocks Set to Explode in 2021:
- Dunelm Group
- InterContinental Hotels
- British American Tobacco
- J Sainsbury
- Vivo Energy
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How To Choose Top UK Stocks?
Choosing such performing top UK shares can be easy, you just have to set aside time and your dedication to look into various stocks on the market.
It takes more than just looking at a stock's past history, although this does help give you an indication of how well and in-demand a stock is. Although you will more than likely see that many have tailed off due to the Coronavirus pandemic, as less demand shows less activity, but for those stocks still have managed to re-shape and are sat awaiting for the hopeful news of normality coming back into the light.
Additionally, there are stocks that have performed very well that still offer great growth potential for them to explode throughout the year also.
There are various factors to take into consideration when looking to choose such stocks. Firstly looking at various industries will give you a good and clear image of how much growth and demand is apparent within various sectors. For example, the Finance and Tech industries have always been solid sectors, although they have had their ups and downs over the year, they still have huge growth prospects as we look ahead post Covid-19.
Then it’s time to look at stock’s financial elements including looking at a stock’s Top Line, it’s revenue, to see what it has achieved over recent times. This will give you a clear image of how in-demand a stock is and also give you an idea of what the stock is potentially capable of in terms of growth prospects.
Looking at the company’s future prospects in terms of what they are looking to achieve and if they have reinvested in order to grow in the long-term outlook is another element to take into consideration, along with looking at what analysts have also stated on these stocks can also be beneficial to you.
Take the fashion retailer ASOS PLC (ASC), this fashion brand was a strong player within its own right which brought in an increase of revenue of up to 23% within the company’s Q3 2020 report ending on December 31st. This is without the revenue in which the brand will now be in receipt of through the acquisition of Arcadia Group brands like Topshop. Which is also why this stock makes the list as a stock that will no doubt explode further in 2021 and many years to come, although will more than likely be one of the most expensive to buy.
Another factor to consider is a stocks market capitalisation, this will give you an understanding of how much a company is worth which is defined as the total market value of outstanding shares. Along with looking at a stock's share price can also indicate its potential. Be mindful, sometimes this is not always the case which is why it's wise to do your own background research.
Then you can look closer into a stock’s metrics including a stocks P/E ratio, P/B ratio and ROE ratio. These are all good metrics to look at when looking to determine if a stock is sitting in a good position. All of these metrics enable an investor to evaluate how well a stock is performing and how much can be gained from the stock, whilst taking on board the stocks liabilities to which this is why the ROE (return-on-equity ratio) becomes a good metric to use to see return on net assets.
Having stated all of the elements in which to look into how to choose the top-performing stocks, it's wise to also think and look ahead as nothing is certain within investing that a stock will stay strong and deliver, which is where additional research comes into play.
Why Choose These Top UK Stocks And How Are They Looking Set To Explode In 2021?
The next question to look at is why choose these top 10 chosen UK stocks to invest in and how do they look set to explode within 2021.
As you will see from the list of top 10 UK stocks looking set to explode, all of these stocks have many similarities including each having their own strong performance histories to the more recent days, along with strong avenues for growth potential for the long-term outlook.
Although it's clear that these stocks are all set across various industries, these are all industries that are set to be on the rise as once again or as they continue as they have evidenced.
Confirmation of these stocks exploding in 2021 is mainly resting on how the world creeps closer to normality is the first answer. Stocks such as Rolls-Royce Holdings (RR.), which has made the list will hugely benefit from within the aviation sector and more obviously as more cars hit the road once again. Similarly, with InterContinental Hotels Group (IHG) who with 2020 had a lot of attention as a stocks share price was on the rise, but as we move closer this stock is certainly one that has the makings of exploding as individuals rush to get a well deserved holiday or mini break from one of their many hotels set across the globe.
These chosen stocks offer great prospects in terms of value to investors. The long-term outlook of these stocks looks bright as they sit in a good financial position at present, even considering how devastating 2020 has been on some of these stocks and as they look to grow as time moves forward. Additionally, as these stocks seek to receive high returns, now is looking like the right to look to invest in these explosive top UK shares.
Now let's take a look at the top UK shares that have made the list of 10 UK stocks looking set to explode within 2021.
1. Dunelm Group Plc (DNLM.L)
Although this stock has and is continuing to perform, that doesn't mean that this stock can not outshine itself in the future. Being a very popular choice for British retailers and especially as it has performed well over 2020, which could be led by numerous factors including new homeowners as Dunelm is renowned for good quality products at a lesser cost for example than Next PLC (NXT).
The British stock has witnessed a 23% increase in sales year-over-year to £719.4 million, pushed by the 14.6% increase in digital sales which as a total digital sales were up by 111% YoY due to the ongoing pandemic.
And the relishing news doesn't stop there for the home furnishing stock as it reported 52% Gross Margin in comparison to H1 FY20 at 51.5%, Operating Cost to Sales ratio up by 100bps, a strong Free Cash flow position of £98 million in comparison to 2020 at £63.9 million.
Although you may wonder that if this stock is already established that it is already exploding, then why make this list. But looking ahead on this stock at its future potential earnings are forecast to grow by 12.25% per year whilst it sits in a strong financial position, it can deliver more growth.
In recent days, this stock has in fact taken a deep dive due to the deputy chairman selling £192 million in the shares which leads investors to question as to why the huge inside selling of the stock, whilst it has been given a consensus ‘Hold’ rating given by 9 analysts who are covering the stock.
With such news, this popular British retailer is definitely one that can look to seek good gains moving forward. Which leaves this stock one to watch especially if its share price continues to look at decreasing as it sits at £13.12 today after taking a 7% decline following recent news headlines, which is currently overvalued based above fair value.
2. Whitbread PLC (WTB.L)
Whitbread PLC is a British restaurant company that is known widely for its largest division hotel chain, Premier Inn, along with Beefeater, Table Table and Brewers Fayre.
As we know 2020 has witnessed the hospitality sector take a huge hit over the year and all sitting closed today for indoor dining and only available for delivery services. But in light of the widespread vaccination distribution, it is moving closer for such brands to re-open. And when they do, this is looking like a stock that is set to explode as individuals welcome and appreciate once again the enjoyment of restaurant dining.
Within the company's Q3 FY21 report it was apparent to see that this stock's Hotel chain Premier Inn has held Whitbread in a good position, despite the effects of the Covid-19 pandemic and even archiving market share gains within the UK whilst it continued to expand within Germany.
In the company’s Q3 report ending its 13 week period on November 26th, Whitbread Plc reported that Premier Inn UK’s total accommodation sales were up 8.9pp ahead of expectations, leading to a market share growth of 11.4%. Despite overall the total UK accommodation sales being down by 55.2% due to the pandemic, clear positive signs are still within the mix.
The brand accelerated in growth within Germany with a pipeline of 68 hotels acquiring 13 hotels from the Centro Group, whilst the British stock kept their hands firm on cash outflow. Leaving this stock sitting is a great position for the long-term outlook.
As the company has confirmed the short-term outlook for this stock is somewhat challenging due to heavy restrictions, but the long-term outlook is looking set for this stock to outperform with an earnings forecast for this stock to grow by 105% per year.
The stock has a current share price of £34.29, which looks again to be overvalued at present, but has a positive outlook when it comes to its PB ratio of 1.5. Other factors including the stock's P/E ratio and ROE ratio will not give you a clear understanding of this stock due to of course the impact Covid-19 has on this stock.
But without a question, Whitbread PLC is a British stock that is set to soar as we lead closer to the world becoming normal once again. And whilst it sits in a growing healthy position this stock is certainly one to potentially look to add to your collection as the year evolves.
3. Rolls-Royce Holdings PLC (RR.L)
Okay, one British stock that has been hit tremendously hard over the past year is Rolls-Royce Holdings PLC (RR). The British aerospace and defence company has seen its share price over a 12-month period declined by over 62%.
The reason as to why this is the case for RR stock, well Rolls-Royce to name one key element is the second-largest maker of aircraft engines in the world. And of course, to the ongoing deadly disease that the world is currently fighting against, has witnessed like never before the travel and aviation industry arguably coming to almost a standstill in comparison to normal times.
This was and is a huge blow for RR stock but the British company still has its hands in other avenues including marine propulsion and energy sectors as well as producing and making power systems in various other industries.
The stock today sits at just under £1.00 which is significantly undervalued when you compare it to the market average. This stock holds a 52-week range of 0.90 at its lowest and 711 at its highest which shows just how volatile this stock's share price can actually be. But nevertheless, this stock has great potential leading forward.
Another avenue for this stock could be electric jet engines, this could be the next ‘Big Thing’. As electric cars look set to dominate the road by 2040, this is leading the way for RR. to look at the new generation within aviation.
Perhaps the new CFO, Deloitte Partner Kakoullis can help with the wheels being put in motion to this forward-thinking avenue.
Rolls-Royce Holdings is like no other, its classic British manufacturing stands out across many avenues which is why top companies such as Emirates Airlines and Air France opt to benefit from RR. high powered engines, to which do not come cheap.
Although this stock may take some time to explode, whilst realistically it more than likely will not explode within 2021 it will however start gaining momentum back to lead to exploding in due course over the coming years, which is why this stock has been included to be a stock to potentially buy or to keep a very close eye on this top-class British stock.
4. InterContinental Hotels Group PLC (IHG.L)
The hospitality group who owns some of the world's leading hotel brands such as InterContinental, Kimpton Hotels and Resorts, Crowne Plaza, Holiday Inn and many more, all set across various continents is looking set to archive good earnings once international travel is able to resume as these brands stand strong amongst consumers worldwide.
In recent days the stock has continued to establish its growth prospects as it has signed an agreement with Immohold Hospitality to expand and grow InterContinental Rabat within Morocco. Additionally, the sign up with IMG is to expand a luxury portfolio in key areas across the Middle East region. This projected plan is looking to open its doors within the start of 2022, the perfect time to operate assuming international travel has once again resumed to normal times.
IHG has also confirmed that they currently have 53 hotels in the pipeline awaiting to open within the coming three to five years.
Based on the company's future prospects, IHG stock has been given a forecast earnings growth rate of 67% per year, assuming the world is fully or more so operational.
Aside from this forecast on growth, 18 Wall Street analysts have expressed their forecast predictions for InterContinental Hotels Group resulting in the stock having an overall Consensus ‘Hold’ rating based on 11 analysts' results.
The stock currently holds a share price of £50.74 which has been relatively stable over the past three months and we can anticipate this stock's share price is to increase further as we head into the year. Along with holding a 52-week range of between £23.85 at its lowest and £51.46 at its highest.
Because this stock has been trading with negatives throughout the year, looking at the stocks various other metrics including its ROE and P/E ratio is not going to give you much to go off.
Looking at this stock’s achievements in normal times gives you an indication of how this stock is capable of growth, within the company's annual Full Year 2019 report revenue was up by almost 7% year-over-year to £4,627 million with operating profit up by 8.2% £630 million.
This British Hotel chain has the backing in order to make this stock explode as we lead into the year, along with this stock being one that investors have been optimistic about in recent months. But we believe that IHG has the definite markings of becoming a hit in 2021.
IHG is also a dividend stock that currently has a dividend yield of 1.5%.
5. British American Tobacco PLC (BATS.L)
If you are one step ahead, you will have seen that this strong British tobacco company has released its preliminary results as of 17th February 2021, which confirmed that this stocks ‘Accelerating Transformation’ despite the effects Covid-19 has imposed on the world, has led this stock to deliver.
Revenue, profit from operations and earnings have all seen an increase respectively along with Adjusted profit from operations up by 4.8%, Adjusted diluted earnings per share up by 5.5% and lastly operating cash flow hitting 90% of target hitting a conversion of 103%.
The stock also confirmed a rise of 2.5% to 215.6p per share for its dividend.
Despite the strong challenges, having a 3.3% increase in revenue vs 2019 as it stands at £25.7 billion is a brilliant result for the company. Additionally, 13.5 million total consumers were counted for the stocks non-combustible products, up by 3 million at the end of the year aiming to achieve the company's future goal of hitting 50 million within 9 years time.
The companies acquiring plans have also benefited, as they have expanded within the U.S with BME acquiring American company, Dryft.
What is looking ahead for this stock?
The stock has announced that it is currently ahead of where it should be to deliver £1 billion in annualised savings by 2022, to develop in operational capabilities and invest in new categories.
The stock currently holds a share price of £26.27 today with a 52-week range of between £23.82 at its lowest and £33.52 at its highest. At this price, it is currently below the fair value which is another strong reason to consider this stock now whilst the company holds a P/E ration of just below 10, which is good in comparison to the market average.
This stock holds profitability, a strong position moving into 2021 in terms of growth along with forecasts set to grow, makes this stock one to look to have in your portfolio.
6. AstraZeneca PLC (AZN.L)
Some may be surprised to see this notable and performing biopharmaceutical company to come on the list as a stock that can explode within 2021, as you would have thought 2020 would have already witnessed this happening, which to some degree is right.
But although this stock has plunged to new highs due to the Covid-19 pandemic, it still has ample of room in order to grow as we move forward in the Post Covid-19 world.
Within 2020 AZN earnings grew by a huge 140% pushed by the strong demand for a vaccine to help seize or prevent this deadly virus that is among us. And it is not stopping there as a forecast earning prediction has been cast for this stock to grow further by 22.50% per year.
Not only is the Covid-19 vaccination one of the main talking points on most people’s lips, AstraZeneca PLC is also strong within its New Medicines sector which is proven to be a quiet force to achieve great success for the top leading company.
Within the company's recent Annual 2020 report, the evidence was there to be seen for the New Medicine sector as Total revenue increased by 33% to $13,950 million. Then look at factoring this into the company’s other reports where Total Revenue including Product Sales and Collaboration Revenue increased by 9% to $26,617 million with Product sales growing by 10% to $25.890 million.
Looking at this stock's Net cash flow from operating activities, this was a huge jump for the stock as it grew by 62% archiving $4.8 million.
From these results it's clear that this stock can deliver and the forecast is set to achieve more. Whilst an earnings forecast has been set as mentioned above, forecasts for earnings per share (EPS) have also been set at $4.75 to $5.00 approximately around 20% growth over 2020.
This stock is hitting all the right notes along with being a strong stock to achieve sustainability, as it seeks to work towards sustainable healthcare solutions amongst all treatments and seizing or prevention of new and well-known diseases around.
7. GlaxoSmithKline PLC (GSK.L)
This glowing pharmaceutical company has been a strong British share throughout many years due to its vaccines and pharmaceuticals divisions.
Now, this stock is taking its strength to new heights, as following the brand’s merger with biotech company Vir last year, the companies are ready to tackle together the on-going fight against the Covid-19 virus and other in demand vaccines to help cure other illnesses such as Flu, which has been at an all-time low mainly due to less social interaction.
Earnings have grown just under 30% over the five year period and have been forecasted to grow by a further 6.20% per year moving forward.
This growth is achievable for the brand as this brand's Vaccine segment hit £7 billion in terms of revenue within the company's Full Year and Fourth Quarter report. Although this sector is trailing behind its pharmaceutical and consumer segments, there is no doubt that it will come to be one of the better performers as we move forward, especially as vaccines are always strong in demand across the world.
We predict this stock's share price will grow higher as time moves forward without a doubt based on numerous solid factors, with one being its heavily focused vaccine division. The stock currently holds a share price of £12.70 with a good P/E ratio of 11.1 and a PB ratio of 4.5, which when you combine these factors with the stocks growth prospects, sits in a relatively good spot.
On top of these positives, GSK also pays a strong and reliable dividend of 6.2% offering a great passive income stream.
8. J Sainsbury PLC (SBRY)
Granted, this industry is deemed to be a safe bet within such challenging times as they are an essential retailer. However, J Sainsbury PLC (SBRY), just like other leading retail brands have seen their demand in sales being strong throughout the year as individuals either seek to be creative within their homes or just out for essential food shopping.
With the company's Q3 report it was clear that the brand had archived positive results as Total Retail sales were up by 7.1%, Grocery Sales up 8.2%, digital sales up by 117% to £5.8 billion almost 40% of total sales driven through online sales with Grocery sales up by 102%.
Whilst confirming Free cash flow of £943 million and underlying profit before tax at $301 million.
These results show a strong demand by consumers and as mentioned above moving forward within the company’s strategic plans the British supermarket chain is looking to lower food prices to focus on offering customers consistent value, accelerating new products launched each year, whilst increasing the number of convenience stores within neighbourhoods over the next three year period. Along with the company's other businesses standing firm within their own right.
This stock has great potential and has been given an earnings forecast of just above 70% per year as we move forward, as it currently trades at £2.31 per share which is looking like this stock is undervalued for what it can look to archive ahead.
9. ASOS PLC (ASC)
The next stock to come on the list is that of the fashion online retailer ASOS PLC (ASC).
ASOS undeniably has had a great year benefitting hugely from the Covid-19 pandemic as sales have sailed through the roof and to top the icing on the cake, Asos has now taken over other brands including Arcadia’s Topshop, Miss Selfridge and HIIT in a deal with over £330 million.
This naturally caused the stock’s share price to jump once the news was announced to which sits today at £57.12 which has jumped by almost 20% from the end of January sitting at just under £45.00. This is due to the stocks recent purchases that have brought this stock to increase within its shares, in fact, earnings have even been estimated to have grown just under 360% over the past year.
Within the company's latest statement ending 31st December 2020, the company was up by 24.5 million active customers, an increase of 23% in retail sales and 16% in International Retail Sales.
Looking ahead for ASOS stock an earnings forecast has been set to hit 18% per year, with 14 Wall Street analysts who are covering the stock giving 14 buy ratings giving a consensus rating of a ‘Buy’ overall. Alongside an average twelve-month price target of £57.66.
This online fashion retailer is already sitting in a good solid position and one in which it looks set to climb higher, as the ASOS brand continues to be the home for many individuals to purchase the latest and affordable fashion trends from all across the globe.
10. Vivo Energy (VVO.L)
The petrol company Vivo Energy (VVO) has delivered over 2020 as it continues to distribute petrol across not just the UK, but countries across the world as it is looking to be positioned well to reach new highs in 2021.
Within the company’s recent trading update it was surrounded by positivity built on by previous quarters momentums. Fuel volumes of 9.6 billion liters, 7% down from the previous year due to Covid-19, whilst Adjusted EBITDA is looking to be at the end range of current market expectations of $331 million to $354 million. Leading the company to distribute a dividend of 3.8 cents per share (48 million) in 2020 to its shareholders.
The company’s strong performance has been brought on heavily by its strong business model that is in place.
The British stock is currently trading significantly below fair value as it holds a share price of £0.87 along with holding a good P/E ratio of 18.7 and a good PEG (price-to-earnings ratio) of 0.9.
Despite this petrol stock showing a downslide within its results, due to mainly the Covid-19 pandemic, this stock is positioned nicely and seeks to be great value at the moment for what is potentially to come for this petrol stock.
One UK Stock to Watch This Year
CVS Group PLC (CVSG.L)
CVS Group (CVSG) is a strong British company that has made its name more visible on the market today, mainly due to more households adding a new addition to their families.
In the company’s latest report, revenue grew by 5.2% to £427.8 million with an Adjusted EBITDA up by 30% to £71 million, Cash generated from operations up by a huge 82% to £94.8 million, Sales grew by 9.4% over the six month period showing strong demand. Active memberships were also on the increase with just under 4% of new members hitting 430,000 as of December 2020.
This stock has gained well throughout 2020 as its share price has grown significantly from its March lows of £7.06 where it sits today at £17.38 which is currently trading below fair value.
The room for growth for this stock is undeniable as the company is currently looking to expand its essential services for animal welfare as well as offering emergency services, which is in line with consumer trends. On top of developing within its other strong avenues.
Forecast earnings are expected to grow by just under 22% per year for this stock whilst it has been given a Consensus overall ‘Hold’ Rating.
To summarize, these top-performing 10 UK stocks look set to deliver more growth and earnings as we look realistically to mid-late 2021.
Set across various industries these budding stocks offer a combination of it all including strong financial positioning, excellent avenues of growth potential, passive income-streams due to some of these stocks on the list being strong dividend payers and stocks in which are looking set to be good investments over the long-term period.
If you are new to investing and want to add one of these top UK shares to your growing portfolio, a stock such as GlaxoSmithKline (GSK) or ASOS PLC (ASC) are great additions as these stocks offer a great long-term outlook set with great returns with stability.
Additionally, if you are an experienced investor, besides all these stocks offering great potential perhaps a stock such as Rolls-Royce Holdings (RR) once you conducted additional research maybe a UK stock that may just catch your eye.
Although these stocks offer such excitement, positivity and sit well within the UK market today, it is worth noting that all stocks come with their own risk elements which is why it is advised to carry out additional research before investing within your chosen stocks.
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