UK shares have rallied strongly over the past few months. And I think this could be just the beginning of a much larger upswing.
It is beginning to look as if the world may be able to get the coronavirus outbreak under control with vaccines by the middle of next year. Such a development would be hugely positive for stocks and the global economy.
What’s more, governments around the world are planning massive stimulus programmes as they recover from the crisis. I reckon these twin tailwinds of vaccines and economic stimulus could send stocks surging higher in 2021.
As such, I’ve been eyeing up some potential investments to buy for 2021. Here are a couple of my favourites, which I believe have the potential to double in the near term.
UK shares on offer
One play on the economic stimulus measures I have been considering is Ukrainian iron ore producer Ferrexpo.
Iron ore prices have already started to increase over the past couple of months as traders have begun to anticipate increased demand for the commodity. Ferrexpo is set to benefit significantly if City expectations are anything to go by. Analysts have already hiked their earnings estimates for the company this year by 100% since April. I believe further growth in 2021 could see the stock achieve significant total returns for its investors.
Other UK shares I am considering for 2021 include System1 Group and RELX.
RELX is a global provider of information and analytics for professional and business customers across industries. This section of the company has continued to see steady demand for its services in 2020. Unfortunately, the operation also runs exhibitions. This part of the business hasn’t been so lucky. RELX has had to smash jobs as demand for exhibition services has slumped. Still, I’m optimistic that when exhibitions return, the group can use its size to grab market share, which may put it on a strong growth trajectory.
System1, meanwhile, has made a handful of mistakes over the past few years, which have caused investors to sell the shares. Nevertheless, the organisation is a leader in artificial intelligence and behavioural analysis. Growing demand for these services could help the business instigate a recovery over the next few years.
Growth potential
I’ve been watching two UK shares closely that seem to have benefited from the pandemic. These are Mr Kipling owner Premier Foods and Reach.
Formerly known as Trinity Mirror, Reach has seen a significant decline in revenues for its print publications during 2020. Luckily, rising digital sales have compensated for some of these losses. I think the additional cash flow from the digital business will provide the company with additional capital to drive growth in the years ahead.
The same goes for Premier Foods. A boom in sales during the pandemic has allowed the firm to pay off a large chunk of its debt, dramatically improving the company’s balance sheet. I reckon the corporation’s newfound financial strength could help underpin growth in the medium term.