Some investment thoughts for the year ahead (and beyond).
What could be more timely than a collection of investment tips for 2021? No need to answer.
Reviving an old feature favourite, I have asked a variety of stock market professionals, writers and bloggers for their top investment ideas for the year ahead (and beyond).
It is also a competition of sorts, pitting this bunch against each other to see whose will do best over the coming 12 months.
Be warned, when I ran this feature at the sadly departed Bullbearings website my tips generally came last (all prices as off Midday 24 December 2020).
Neil Wilson, chief market analyst for Markets.com, points his index finger at the FTSE 100: “There’s a big recovery coming.
“Assuming vaccines mean a return to almost normal and with global macroeconomic numbers looking very strong through 2021, combined with the Fed anchoring rates and the general liquidity sloshing about, I think the UK is very cheap and liable for a strong bounce.
“The FTSE 100 also has an expected 2021 dividend yield of 4%, making it the most attractive among developed market stock indices for income.
“On top of that, while UK domestic stocks have re-rated, they still trade at about a 10-15% p/e discount to the broad European market and against the US,
“British equities trade at a 35% discount based on a two-year earnings outlook, further boosted for the Footsie by its strong bias to cyclical and value stocks.”
(FTSE 100: 6,502)
Peter Sleep, Senior Investment Manager, Seven Investment Management, settles his binoculars across the pond at Berkshire Hathaway Inc (NYSE:BRK.B).
“This is a large US conglomerate, run by the legendary investor Warren Buffett, made up a mixed group of companies such as the railways, pipeline, insurance, banking and a major shareholding in Apple.
“It has underperformed in recent years as investors have sought out higher growth stocks like Tesla or Amazon. Berkshire Hathaway is not a simple business, but it seems to be trading at a discount of about 30% to the sum of its parts – an abnormally large discount.”
Andrew Hore, editor of the AIM Journal, plucks a smallcap life sciences company focused on skin health, SkinBioTherapeutics PLC (LON:SBTX).
“This microbiome-based skin treatments developer has developed a self-managed human study with its partner Winclove Probiotics for psoriasis treatment AxisBiotix.
“This will commence in the first quarter of 2021.
“If this is successful, AxisBiotix could become a commercial food supplement by early-2022.
“There is potential in other areas. Croda, the company’s partner in the cosmetics market, is on course to scale up manufacturing using SkinBiotix technology ahead of a launch of ingredients that can be added to existing skin treatments.
“Earlier this year, a placing and open offer at 16p a share raised £4.45m. According to broker Cenkos, there should still be cash in the bank at the end of June 2022, even if there are no revenues.
“That means that there should not be any need for share issues in the medium-term.”
John Kingham, of the UK Value Investor blog picks Admiral Group PLC (LON:ADM).
“I chose this car insurance giant as my pick for last year and it produced a total return of about 35% in 2020, which is not too shabby.
“The fundamental attractions remain in place, so I’m going to stick with Admiral again.
“Those attractions include: Management focused on the long-term; low cost operations; rational insurance pricing; multiple European businesses just turning profitable after a decade of building scale; a proven ability to move into adjacent markets such as home insurance and loans and a potential cash return to shareholders if it sells its comparison website business.
“And as if that wasn’t enough, a double-digit historic growth rate and a dividend yield of 5% are the icing on the Admiral cake.”
Chris Beauchamp, chief market analyst at IG, opts for a safety-first pick of Halma Group PLC (LON:HLMA).
“Halma is not one that trips off the tongue of many people, and even seasoned UK investors may have overlooked this firm, but as one of the FTSE 100’s most consistent performers it is time the group stepped into the spotlight.
“Halma is a safety equipment firm that has seen steady share price returns since 2009, and has also managed to increase its dividends by 5% or more for four decades. It is not cheap, but then investors have to pay for quality in this market.
“And it weathered the storm of Covid very well, dropping by nearly a third but then rebounding swiftly.
“As one where the fundamentals and technical appear to align, it looks very interesting heading into 2021.
(HLMA: 2,398p) )
Richard Hunter, head of markets at Interactive Investor, goes for a more lowly rated FTSE 100 name, NatWest Group PLC (LON:NWG):
“NatWest rounded off the recent banking season with a surprise swing to profit for the quarter.
“Awash with capital and a Tier-1 ratio increased to 18.2%, its ability to weather any oncoming economic storms is comforting, and with the regulator having opened the door to a return of dividend payments in the New Year, NatWest could be well placed to mirror its previous yield of over 4%.
“There remain issues and risks, including the economic effects of the latest Covid-19 outbreaks and the outcome of the UK/EU deliberations, low interest rates and the overhang from the government’s 62% stake.
“But with the shares having declined by 33% in the year to date, looking past the pandemic, the garden could be rosier than many are currently thinking.”
Ryan Hughes, head of active portfolios at AJ Bell, picks an investment trust, Fidelity Special Values PLC (LON:FSV).
“The UK market is at an interesting inflexion point as we run into 2021. It has lagged global markets for a number of years as the structure of the market with a large allocation to ‘old economies’ such as oil and a large financials weighting has hampered returns.
“With the conclusion of Brexit finally here, there is a chance that investors once again begin to look at UK equities and for that discount to close.
“Fidelity Special Values, managed by Alex Wright could be very well placed to capitalise on this with his focus on solid but out of favour companies.
“The burst of performance seen late this year when news of the vaccine was announced shows how much performance potential is in these stocks and this is helped by the 18% gearing Wright has currently employed to take advantage of price weakness.”
Darius McDermott, managing director of FundCalibre, chooses a unit trust focused on an out-of-favour market, the Man GLG Income Fund.
“More than one vaccine and early approvals should help us get on the path to economic recovery in 2021.
“Brexit will be resolved (one way or another) and this will bring to end a lot of the uncertainty that has been hanging over our stock market for almost five years. The UK market is cheap, unloved, and under-owned.
“With cash near zero, even though dividends are down due to lockdown they remain very attractive – just look at the millions of savers moving out of NS&I.
“Man GLG Income fund is ideally placed to benefit from a pick-up in sentiment and economic recovery. It has a value-driven approach and invests no less than 80% in UK companies of all sizes.
“It can also invest in continental European companies that derive a substantial part of their revenues from the UK and has the ability to selectively invest in corporate bonds if the manager feels the risk/reward characteristics are more favourable.”
(Acc unit: 267.4p)
Peter Higgins, of the Twin Petes Investing podcast and Conker3 twitter fame, reckons one investment that will head north in 2021 is Polar Capital Holdings PLC (LON:POLR).
“A magnet for income seekers, Polar Capital is an investment management company with approximately £16.9bn of assets under management for investors large and small across a range of geographies and sectors.
“Among several strong performing funds is the FAAANMGTAASTICQ (pronounced fangtastic) £3bn winner, the Polar Capital Technology Trust (LON:PCT), for investors that wish to gain access to the likes of Facebook, Amazon, Apple, Alibaba, NVIDIA, Microsoft, Alphabet, AMD, Samsung, Tencent, Intel, Cognex and Qualcomm.
“The manager is a resilient company with strong fundamentals, including net profit margins above 27%, a return on investment of almost 35%, 195p of dividends since 2014 and earmarked to yield 5.12% in 2021.
“After providing investors with total annualised 10 year returns of 19.86%, POLR is still looking to scale new heights and increase its global footprint.”
Vince Stanzione, author of the bestseller The Millionaire Dropout, is glowing in his recommendation of the yellow metal that’s not been on everyone’s lips in 2020 – uranium.
“Nuclear power is a very credible and clean way to generate electricity.
“Yes, Homer Simpson works in a nuclear power plant and for many the Fukushima Daiichi nuclear disaster is still fresh in their minds after almost 10 years, but you cannot ignore nuclear power.
“There is no tradable uranium futures market and you certainly don’t want to buy physical and store it at home, so investing in uranium stocks is the way to play it.
“The safest uranium play is perhaps Cameco Corp (NYSE:CCJ, TSE:CCO). If you fancy a higher-risk play look at Energy Fuels Inc (AMEX:UUUU, TSE:EFR), which has risen almost two thirds in 2020 and could go up the same again in 2021.
“There are also a few ETFs, one being HURA Horizons Global Uranium Index ETF (TSE:HURA).”
Oliver Haill – Last but by only some means least, is me, and I’m going for the iShares Electric Vehicles and Driving Technology ETF (LON:ECAR): This is a punt on the electric vehicles market. I’ve become increasingly interested in thematic ETFs this year – and this theme is a no-brainer for me.
They offer a great way, I think, to invest in a sector or idea as a whole. There are other EV and associated ETFs that I could equally go for, but I picked one that is trading in London and has exposure to legacy carmakers, who I think will start to catch up with the likes of Tesla in the coming year or two.
The ECAR fund, which was launched in 2019, has its biggest holdings in specialist EV manufacturers Tesla and China’s BYD, but also has stakes in legacy carmakers Kia, Fiat, GM and Hyundai as they all pivot to EVs, as well as technology specialists like Xilinx, Infineon and Samsung.
If you want something more cutting-edge, I also like the SPDR S&P Kensho Smart Mobility ETF (NYSEARCA:HAIL), which offers a more techy tilt, with its two biggest holdings being China EV specialist NIO and hydrogen fuel cell systems maker Plug Power, followed by Tesla, electric delivery vehicle maker Workhorse, auto component suppliers BorgWarner and Visteon and others like Yandex and Ambarella. (It also has the best ticker code, but is not available on all UK fund platforms.)