Deciding which are the best shares to buy now is clearly very subjective. Different investors are likely to have differing views on what traits are most attractive in a specific company.
However, the most attractive stocks to purchase today could be those businesses with solid financial positions and competitive advantages that provide less risk and greater return potential.
Furthermore, they’re likely to trade at low prices that mean there’s significant scope for capital growth in 2021 and over the long run.
Financially-sound businesses may be among the best buys
The best shares to buy now could include those companies that are likely to overcome short-term economic and political risks. Threats such as coronavirus and Brexit could weigh on investor sentiment in the early part of 2021. They may even cause a market downturn that’s catalysed by challenging operating conditions across many sectors.
Companies with strong balance sheets may be able to capitalise on difficult industry outlooks. For example, they may have access to capital that enables them to make acquisitions to strengthen their market position. Or they may be able to outlast weaker peers to increase their market share. This could lead to them enjoying stronger profit growth in the long run as a likely economic recovery takes hold.
Sound strategies and a competitive advantage
The most appealing shares to buy today may also have competitive advantages versus their sector peers. For example, they could have a unique product or enjoy strong customer loyalty. This may mean they produce more resilient levels of sales and profitability in challenging economic conditions, and benefit to a greater extent than rivals from improving operating conditions.
Companies that have flexible strategies may also be more attractive buying opportunities at the present time. The world economy is undergoing rapid change that could fundamentally shift consumer demand within many industries.
Those businesses with a low proportion of fixed costs and strategies that can adapt easily may find it less costly to adjust to a ‘new normal’ in the coming years. This may lead to greater profitability and a higher share price over time.
A wide margin of safety
The best shares to buy now are likely to have wide margins of safety. In other words, their present valuations are unlikely to accurately value their long-term financial prospects. This may be due to weak investor sentiment, or an uncertain near-term operating outlook. As a result, investors may be able to generate high returns as market sentiment improves and operating conditions do likewise.
Even after the stock market rally in the final three quarters of 2020, many stocks trade at attractive prices. Buying a diverse range of them may produce impressive returns over the coming years that are ahead of the wider market.