I plan to buy a basket of cheap UK shares in 2021 to take advantage of the country’s economic recovery.
I reckon the market is severely undervaluing the prospects for a considerable number of businesses, and I’m looking to take advantage of this discrepancy.
Cheap UK shares
One company that stands out to me is Halfords. This corporation has surpassed all expectations in 2020, and I reckon its good fortune will continue in 2021. A surge in demand for bicycles and cycling equipment this year has provided a windfall for the group. I don’t think this will be a one-off.
As the world moves towards a more sustainable future, I believe the demand for green transport will continue to grow. At the same time, equipment acquired this year during the pandemic will need to be maintained going forward. As one of the largest bicycle retailers in the country, Halfords should continue to profit from this theme for years to come, in my opinion.
Two other cheap UK shares I’ve been eyeing up are outsourcing group Mitie and pub operator Marston’s. These are two very different businesses. Nevertheless, they’ve both been severely impacted by the coronavirus crisis.
Marston’s has struggled due to the forced closure of its hospitality venues. Meanwhile, Mitie is having to deal with higher costs, which are eating into the group’s already thin profit margins.
I reckon these are only short-term pressures. Before the pandemic, spending in hospitality venues was at an all-time high. I suspect the sector will recover swiftly when restrictions are lifted. At the same time, I think the UK economic recovery would benefit Mitie. Higher sales may come as a result of increased confidence in customer-led companies.
Put simply, I believe these two operations could be some of the best cheap UK shares to play the UK’s economic recovery in the years ahead.
Long-term growth
Renewi and International Personal Finance are not as exposed to the state of the UK economy as the companies profiled above. However, I still think they could be worth adding to a basket of cheap UK shares in 2021.
Renewi is, quite literally, a rubbish business. It provides waste disposal and recycling facilities for customers across the UK and Europe. I think this is a highly defensive business and should continue to see growth, no matter what the future holds for the UK economy over the next few years.
International Personal Finance offers unsecured consumer finance products across Europe. Like many other lenders, the firm is expected to report a loss this year due to credit write-offs. However, analysts are expecting a return to growth in 2021. I believe this could lead to improved investor sentiment towards the shares and large total returns for investors in 2021. If the recovery is faster than expected, the stock may even exceed City expectations.
