The FTSE 100 index is down over 1,000 points from the start of the year. And some individual companies have seen share price falls of over 50%. On the other hand, there are some businesses within the index that have outperformed. Several of these top stocks are British. If a company can perform well during the unprecedented year that 2020 has been, it fills me with a lot of confidence for the 2021 outlook. So let’s take a look at some of my stocks to watch in 2021.
2020 strong performers
You may see the stock called Scottish Mortgage Investment Trust and be slightly misled. The trust can invest in property, but isn’t specifically a real-estate investment trust (REIT). It can invest in various different asset classes, including stocks. The underlying investments are managed by Baillie Gifford & Co, based out of Edinburgh.
Performance in 2020 has been very good, with the share price up over 100% on a rolling 12-month basis. This performance has been closely linked to the assets owned in the fund. It’s one of my top British stocks, but the trust doesn’t only own UK shares. For instance, it has a stake in Tesla. This was a great call, and has helped increase the net asset value of the trust.
Another top British stock that has performed well this year is Ocado Group. I was bullish on the firm going into the first lockdown, and since then the share price has flown higher. It looked overvalued to me by Q3, with a market capitalisation of £19.3bn. But the share price has since corrected from 2,800p down to around 2,100p. This puts it at a much more reasonable price to buy in at, and so it’s firmly on my 2021 watchlist.
British stocks ready for a turnaround
At the other end of the chart are the struggling British firms. Rolls-Royce Holdings endured a torrid first three quarters as flying hours reduced massively. Yet with a large-scale restructure already under way, the winds could be turning. Cost-cutting is expected to have saved £1bn by the end of the year. Given that the share price would need to double just to reach the levels seen in January, I think there’s plenty of room for appreciation in 2021.
The British banking sector is another area of the economy that hasn’t performed well this year. Even with a share price bounce of 29% over the past three months, the Lloyds Banking Group share price is still down 43% in a year. Barclays has experienced a similar bounce, but is still down on the year as well.
Low interest rates and high bad debt provisions have hampered profitability for both businesses. But over the past few months, the large provisions set aside for bad debt have been reduced, effectively putting money back onto the banks’ balance sheets. With a vaccine rollout in the UK already beginning, I think these two British stocks could be top performers for 2021.
