It’s too early to claim that a strong economic recovery is around the corner. There are plenty of issues on top of Covid-19 that could derail a UK share price recovery in 2021.
That said, it’s certainly worth considering which stocks could rocket in value during the next 12 months. There are many UK shares which could soar in value should the economic rebound take hold.
It seems, in fact, like UK share investors are already investing with a view to riding an economic recovery. As AJ Bell investment director Russ Mould recently commented, “Investors seem to be looking for cheap recovery stocks rather than highly-priced havens which offer greater earnings reliability.
“The theory is the long-awaited vaccines will prompt a bounce in economic activity, with the result that corporate profits and dividends will rise faster in 2021 at those firms whose business models suffered the most at the hands of the pandemic in 2020.”
3 great UK shares for a new bull market
Here’s a cluster of cyclical UK shares I’d happily buy in an ISA for a 2021 stock market recovery:
#1: Ryanair Holdings
A breakthrough on a Covid-19 vaccine could see airlines like Ryanair Holdings among the best-performing UK shares in 2021. There is considerable pent-up demand for holidays following ongoing coronavirus lockdowns. It’s likely that travel stocks will enjoy strong demand from business travellers as economic conditions improve too. And I think Ryanair is one of the better ways to play this theme. As Morgan Stanley recently commented, it has the ability to ramp up capacity faster than most of its peers to exploit the recovery. It also has “ample liquidity to fund cash losses if recovery takes longer”, providing investors with a layer of security.
#2: ITV
Advertising spending always picks up significantly when signs of an economic recovery emerge. It’s a phenomenon that broadcasters STV Group and ITV have already reported in recent months. And it’s one of the reasons I’d buy the latter — until recently an established member of the FTSE 100 — in my ISA. But it’s not the only reason. The mass rollout of a Covid-19 vaccine will also enable the company’s ITV Studios arm to spring back into action again. ITV’s production unit has witnessed extraordinary revenues growth in recent years.
#3: WPP
Naturally the recovery in advertising budgets bodes well for UK shares like WPP. I like this FTSE 100 ad agency as it has the scale to exploit these improving market conditions to the max. And I’ve been encouraged by its plans announced this week to double-down on fast-growing areas like commerce, experience, and technology to help it ride exciting phenomena like e-commerce. It plans to achieve this through heavy organic investment and significant acquisition activity, it said. I think these moves should electrify profits growth in this new decade.