This week Boris Johnson laid out his plans to have the country back to normal by the 21st June. A date sure to be marked in many people’s diaries. This greater certainty has already helped boost value shares, while on the flipside hitting shares that had done well under pandemic conditions, like technology-focused investment trust, Scottish Mortgage.
On Tuesday, Avast and Just Eat also made up the rest of the biggest fallers on the FTSE 100. Nearly all the biggest risers on the same day were from hard-hit sectors such as retail and office landlords, banks, aviation and so forth.
I think we may well see this trend continue over the coming months. Optimism about restrictions lifting and return to normal will boost value shares. The opposite will boost growth shares or those whose business models fared better under lockdown conditions. For example, Ocado and other e-commerce shares, as well as gaming shares.
Despite the roadmap, what we can confidently predict is that there will be road bumps. That’ll create opportunities for savvy investors. The volatility in markets will likely help traders but also potentially provide buying opportunities for those who prefer to buy and hold a portfolio of high conviction holdings.
Best stocks to buy now
If you want to buy value shares right now then there are quite a few options.
You must do your own research before making any investment but these, in my view alone, may be amongst the best stocks to buy right now.
- Aviva – has slimmed down, most recently selling its French business for €3.2bn. That follows on from other disposals which are making the group leaner. The strategy if it continues to be executed well could unlock shareholder value.
- Rank Group – the operator of bingo halls and casinos could be a beneficiary of the vaccine rollout if all keeps going to plan. That’s because the target market for bingo will likely be in the priority vaccine groups and should be able to visit in person. There may also be a boost to the shares if Rank rejoins the FTSE 250, which means trackers would have to buy the shares.
- WHSmith – the retailer should benefit from the rush of people booking holidays. Travel-focused retail is a big part of its business and was performing well pre-pandemic.
- Informa – having conferences restart in a traditional fashion may provide a boost to Informa. A return to in-person conferences and exhibitions is already underway in China and Asia where the virus has to date been better suppressed. The subscriptions part of the business should continue to grow as well.
Clearly, this is just a very brief overview of possible reasons why each share could do well. These pros need to be weighed against cons before taking any action.
They are also just a handful of the shares that could bounce back strongly in the coming months if the virus is contained and life gets back to normal as planned. There are many other share prices that have already begun to recover on expectations that things will improve from here on in.
Shares that could bounceback but which I think are riskier
Riskier options include International Consolidated Airlines, easyJet and Rolls Royce. All are very much reliant on air travel. The latter has been very volatile and that could well continue.
I’d still personally be very wary of investing in Cineworld shares. I’d prefer to invest in companies that have (at least relatively) sound finances along with operating in an industry that doesn’t face massive threats. In the case of Cineworld that’s the rise of streaming.
Landlords have also done well since the roadmap update, but I’m still wary that the industry faces structural challenges. Trends such as e-commerce and home working have been accelerated by the pandemic. The change these trends bring about will likely continue, even as the economy normalises post-pandemic. As such I think this will put pressure on the share prices of companies like British Land and Land Securities.
The four shares I highlighted as possible best stocks for me don’t face the same level of business model disruption and therefore I think could post better, sustainable gains over both the coming months and years.
As we head towards the end of lockdown, growth shares have, for now at least, become more contrarian. Although there are plenty of good growth shares. I have price alerts set up on Team17, Computacenter, IXICO and Tremor International and I’m researching a number of others.
Overall, as always, no investor can predict the future. It’s just that based on what I’ve seen this week and what we’ve tended to see over the last twelve months, I think value shares could outperform. That’s really only on the basis though of my observations and assuming that the path to lifting all lockdown restrictions remains on track.
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This article is not investment advice and it is just my opinion. Always research a stock before buying. I don’t own any of the shares mentioned in this article.
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