The first week of 2021 is now behind us, and the pace is quickening. The FTSE 100 had a strong start, up over 400 points by the time Friday evening came.
In terms of shares to buy in 2021, there are several that have already caught my eye. The Stocks and Shares ISA deadline is still three months away and with some of my allocation left, holding the new shares within the tax wrapper will enable me to not pay capital gains tax on any profits made. So if the shares I buy in 2021 rally hard, I’ll be thankful of being able to keep more of this profit for myself!
A cheap oil giant?
One stock that’s started the year strongly is BP (LSE:BP). In 2021, the share price is up over 15%, making it one of the shares I’m looking at buying. There’s always a strong correlation between BP and the oil price, for obvious reasons. WTI oil has moved around 10% higher in the past week, which is one reason why the share price has moved up as well.
If we look at a longer timeframe, it’s clear the BP share price is at low levels. In November last year, it traded below 200p, levels not seen for decades. So when I’m looking at shares to buy right now for 2021, BP looks attractive. Contrarian investors might agree with me. BP’s financial results for last year weren’t pretty. The latest Q3 results showed a loss of $0.5bn, compounding the large loss of $16.8bn in Q2.
Yet this is BP we’re talking about. It’s one of the largest firms in the oil sector, and has been in business for over 100 years. I don’t see the company being in this bad a position financially if we fast forward five years. From that angle, the low share price now as we enter 2021 makes it interesting for me to buy.
A unconventional share to buy
The Scottish Mortgage Investment Trust (LSE:SMT) is a fund that invests in other businesses. As such, when I buy the stock, my performance will be linked to how the assets held within the trust perform. Two things make opportunities for the trust to do well. One is manager skill, and the other is volatility. The fund is run by Baillie Gifford, which is a very well respected investment firm. So the first box gets a tick. In terms of volatility, 2020 definitely had plenty of that! As a result, the share price doubled in value over the course of the year.
So why do I think that it’s still a good share to buy for 2021? Firstly, the managers haven’t changed. So I believe the administration and decisions that will be taken would be sound. Secondly, I think 2021 could easily be as volatile as last year. The events from the first week alone (from a third UK national lockdown to a US riot at Capitol Hill) highlight this.
It’s an unconventional share to buy as it isn’t really a traditional company in a traditional sector, but that doesn’t put me off looking to buy it.