These were two of my best shares to buy in 2020. Which would I grab for 2021?

For investors, 2020 turned out to be a turbulent and volatile year. But bargain buys were everywhere. These were two of my best shares to buy this year.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Illustration of bull and bear

Image source: Getty Images.

With two trading days left in 2020, the year is nearly over for UK investors. As I write, the FTSE 100 index has added 140 points (2.2%) today to reach 6,643 points. This rise was fuelled by an agreed Brexit deal, plus another round of US stimulus spending. Alas, the Footsie has still lost 900 points this year, down almost an eighth (11.9%). While the UK stock market has declined in 2020, many individual shares soared as investors snapped up cheap stocks. Here were two of my best shares to buy in 2020.

Best shares to buy #1: Lloyds

Lloyds Banking Group (LSE: LLOY) was the UK share I covered most often in 2020. I wrote about Lloyds as one of the best shares to buy dozens of times, because I felt the bank’s stock was deeply undervalued. With the Lloyds share price collapsing to a third of its 2019-20 high, I sensed investors were panicking. I knew that Lloyds had a rock-solid balance sheet, packed with safe assets such as low-risk UK mortgages. Also, Lloyds had billions in excess capital to absorb coronavirus-related loan losses.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Since their 2020 low of 23.59p on 22 September, Lloyds shares have rebounded hard. My best Lloyds pick was two days later, at 24.58p on 24 September. Today, Lloyds trades at 37.02p, up 57% from their nadir. Having tipped Lloyds so often as a low-risk buy at low prices, it was definitely one of my best shares to buy this year. Also, many investors view Lloyds as a boring, old-world FTSE 100 share, so such high returns are definitely a bonus.

Share #2: Dignity is restored

From a well-known share I repeatedly covered to a high-risk stock I talked about only once — but what a pick. On 16 July, I found the cheap shares of Dignity (LSE: DTY) hugely appealing. Dignity is one of the UK’s leading funeral providers (but not to be confused with Swiss euthanasia clinic Dignitas). Why was Dignity one of my best shares to buy in 2020? Because its stock skyrocketed within one month of me writing about it.

I recall writing about Dignity when it floated in 2004. As the UK’s #2 in funerals (after Co-op Funeralcare) with high operating margins, I liked this business. By October 2016, Dignity was a FTSE 250 powerhouse with a market value of £1.4bn and a share price peaking at 2,820p. Following steep share-price falls in 2017 and 2018, the Competition and Markets Authority (CMA) launched an investigation into funerals in March 2019. This sent Dignity crashing further from one of the best shares to buy to one of the worst, in my view.

With the Dignity share price at 270p, down nine-tenths (90.4%) from its high, I saw deep value in this fallen angel. With the entire group valued at a mere £135m, I argued its shares were ‘cheap as chips’. In August, and due to Covid-19, the CMA abandoned several of its proposed remedies, including price controls. By 14 August, Dignity shares had spiked to 640p, up 137% within a month. By 7 December, they were 736p and trade at 645p today. Nice.

Which would I buy for 2021?

As Dignity’s recovery may already be fully baked into its share price, Lloyds would be my low-risk value pick for 2021. Indeed, when Lloyds restores its dividend, I expect great returns from the bank next year. That’s why I buy Lloyds shares today, ideally inside an ISA for tax-free dividends and capital gains!

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here’s a FTSE 250 stock to buy to benefit from the construction boom!

Jabran Khan details a FTSE 250 stock that could be primed to benefit from the infrastructure and construction boom.

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Is the Royal Mail share price a buying opportunity?

With a 6% dividend yield and a price-to-earnings ratio of 3, is the Royal Mail share price in buying territory?…

Read more »

Scene depicting the City of London, home of the FTSE 100
Investing Articles

3 FTSE 100 shares! Should I buy them?

I'm searching for the best FTSE 100 stocks to buy following recent market volatility. Are these blue-chip UK shares too…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Should I buy one of the cheapest shares on the FTSE 100 index?

This Fool explores one of the cheapest stocks on the FTSE 100 index by share price and decides if he…

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

With trading suspended, where could the Eurasia Mining (LON:EUA) share price go next?

This morning, the EUA share price was suspended pending an announcement - so could improving sales send the share price…

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

Are the FTSE 100’s top income stocks a bargain?

The FTSE 100 is renowned for its value and dividend stocks. So, are the index's top income stocks worth a…

Read more »

Compass pointing towards 'best price'
Investing Articles

Scottish Mortgage shares have slumped 40%. Time to buy now?

Scottish Mortgage Investment Trust (LON: SMT) shares have rewarded shareholders well in recent years. I'm thinking of buying now they're…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

3 recession stocks I’d buy in a hurry

With the economic outlook getting worse, our writer highlights a trio of recession stocks he would consider buying for his…

Read more »