UK stocks cleaned up in 2020, but they could have a rockier 2021. Still, keep these 7 names on your watch list to buy on dips.
The UK economy was not ready for the havoc that the Covid-19 pandemic brought upon it. Measures to contain the virus have crippled several British sectors of the economy like travel, hospitality, entertainment, to name a few. Small and medium businesses have been decimated, with most having to considerably scale back their operations or shut down entirely. Travel has ground to a halt, and stock markets have taken a big hit.
In the case of the UK markets, the stock market did have an unpredictable 2020 with the pandemic playing out and domestic influences. Two major events will influence the market in 2021.
- Brexit - The Brexit transition is complete, and the UK has negotiated a deal with the EU. Now it remains to be seen how well the British and European markets adapt to a post-Brexit market.
- Covid-19 - The pandemic is expected to abate with multiple vaccines approved and more under development. Shares are expected to rebound, and the markets should make a strong recovery in 2021.
So with an expected rebound in the UK stock market, which British stocks are worth keeping an eye on? Which stocks are worth investing your hard-earned money in and expect a high return? Many companies are currently facing challenges in the short term, but with the situation predicted to improve, the following stocks are worth keeping an eye on.
Long-Term Growth Opportunities
The UK stock market is facing several issues at this point due to the COVID-19 pandemic. However, several stocks make it possible for high returns in the long run. If you are looking at investing in the UK stocks in the current scenario, then stocks of companies that are focused online are a good option.
The Covid-19 pandemic saw uncertainty take over the markets in the UK. However, the UK housing market has performed reasonably well. With the country under lockdown, Rightmove saw traffic on their website increase considerably. The UK government's announcement to put a "stamp duty holiday." The stamp duty holiday allows home buyers to purchase a home for up to £500,000 and not pay any stamp duty.
Properties that cost more than £500,000 will be granted a reduced rate. The UK housing market has a market capitalization of £5.58 billion. Investors closely monitor the large-cap stock. The imminent arrival of the vaccine has ensured that the property market will see an upswing in 2021. Even though Rightmove has faced some challenges due to the COVID-19 pandemic, their financial position is strong to tide them through any short-term challenges.
The hospitality sector faced its greatest challenge when the COVID-19 pandemic hit, and hotels were forced to shut down amid travel restrictions. Many hotels were turned into quarantine centers or were thrown open to health workers, requiring them to operate without generating revenue. InterContinental Hotels group was no different, with the pandemic forcing them to close most of their hotels.
However, with the vaccine on the horizon and travel restrictions being gradually lifted, 2021 looks promising for the InterContinental Group with an uptick in bookings. InterContinental's finances have always been healthy, and with the news of a possible merger with the Accor group, InterContinental stocks could represent a significant return for investors.
Another stock that could see the stamp duty holiday benefits, Persimmon, had a stellar showing in 2020. The stamp duty holiday drove home-buyers to purchase new properties and saw a surge in investors buying up properties. In the first half of 2020, Persimmon saw a 49% year-over-year growth, and the second half of the year reported a 21% increase over the last year. Despite the COVID-19 situation, Persimmon finished 2020 on a high note and is set for further gains in 2021, definitely a smart addition to any portfolio.
Some UK shares are recovering after the stock market crash of 2020. These are mainly banking shares that may experience some turbulence in the short-term but are a reliable option for the long-term. These are mostly banking shares like those of Barclays and Lloyds.
Even though banks in the UK suffered losses in 2020, they have rebounded and recovered most of their losses. Several factors could see Lloyds having a positive year in 2021. The freeze on dividends has been lifted by the Bank of England, which means Lloyds and other banks can start paying dividends again.
The payment of dividends is unlikely to face any more disruptions, which could positively influence investor sentiment. The COVID-19 situation's improvement could also see the markets turn bullish, and it is believed that the situation should normalize fairly soon. The implications of this are that the stock market rally could drive up the prices of shares of Lloyds Bank.
Lloyds Bank also has a positive outlook thanks to its strong financial position, which is continuously improving. This could also be a factor due to which the share price could rally in 2021.
Barclays is another UK stock that investors will be looking at closely in 2021. The height of the COVID-19 pandemic saw Barclays' share price drop to 80 pence. The share price has since rebounded since the improvement in the COVID-19 situation. With Brexit finally having been concluded, the Barclays stock is expected to gain in 2021, with analysts predicting ratings of
£1.57 per share with an estimated high of £2.50. Even though the outlook looks positive in 2021, Barclays has emphasized that there will still be a degree of uncertainty in the markets heading into 2021.
2020 was a strong year for Tesco, with the company seeing its online sales skyrocket thanks to the lockdown. The Tesco stock rose 7% from the start of the year, generating £26.7 billion through sales. Food sales within the UK also went up by 9%. Tesco has also finalized the deal to sell its Thai and Malaysian arm, at an estimated value of around £10.6 billion.
The company followed this up by announcing a special dividend to send £5 billion of the net worth to shareholders and adding £2.5 billion to the Tesco PLC pension scheme. Analysts have predicted a median price of 276p for Tesco shares in 2021, making Tesco stocks an excellent option in 2021.
BP announced its foray into renewable energy, planning to maintain a presence in the oil industry while targeting a capacity of 50 gigawatts in the renewable energy sector in 2021. BP's foray into renewable energy comes at an opportune time for the company, with the world looking to move away from fossil fuels and become more eco-friendly. 2020 saw a significant slowdown in demand, with the world coming to a near standstill due to COVID-19.
BP lowered its losses from $16.8 billion in Q2 to $0.5 billion in Q3. New projects are in the pipeline. As BP makes its way into the renewable energy sector, 2021 will see its stock rise significantly as the world embraces eco-friendly energy sources.
This is the ideal time to invest in the stock market, with shares that fell when the COVID-19 pandemic hit making a recovery. Markets are predicted to make a recovery, and stock prices will rise, making this an ideal time to enter the market at a lower price point and enjoying positive returns on investments.
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