3 FTSE 100 shares I’d buy for the 2021 stock market rally

Paul Summers picks out 3 FTSE 100 (INDEXFTSE:UKX) stocks that could thrive in 2021 as coronavirus restrictions are lifted and investor confidence rebounds.

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After a strong start to 2021, the FTSE 100 has been treading water in recent weeks. Assuming the coronavirus vaccine programme proceeds as planned, however, I suspect we could see a resumption of positive momentum for the rest of the year. In fact, I think there’s a good chance that those stocks that have suffered the most from coronavirus-related travel restrictions and lockdowns could thrive. With this in mind, here are three I’d buy before a full market rally.

Burberry

First on my list is luxury goods manufacturer and retailer Burberry (LSE: BRBY). Last week’s Q3 trading update certainly provided those already invested, such as myself, with the reassurance that it was managing to weather the storm.

While overall comparable store sales fell 9% in the 13 weeks to Boxing Day thanks to travel bans and store closures, Burberry reported “particularly strong” full-price sales growth in markets such as Mainland China and Korea. These sales were driven by new, younger customers, highlighting the £7bn cap’s growing inter-generational appeal. The “exceptional” consumer response to its festive campaign featuring footballer Marcus Rashford was another highlight.

And the downsides? A full recovery will still take time. As of last week, 15% of Burberry’s stores remained closed and 36% were operating with reduced hours. The tourist centres in which it has its stores also continue to see devastatingly low footfall. But I think any rebound in sales in Europe, the Middle East and Africa later in the year could be a turning point.

Diageo

I can’t talk about FTSE 100 shares that might rally in 2021 and fail to mention Diageo (LSE: DGE).

As is to be expected, the beverage behemoth has been hit hard by the closure of restaurants, pubs and bars globally. Similar to Burberry, however, I think Diageo’s share price can begin to rally as and when restrictions are gradually lifted. After all, demand for premium alcohol won’t have been permanently damaged by the pandemic. If anything, I think the opposite will prove the case as friends and families reunite. 

In the meantime, I can’t ignore the dividends. Despite its current trials and tribulations, Diageo continues to return cash to its owners. 

With its bursting portfolio of brands and global reach, I see this as one of the best ‘buy-and-hold’ options around.

Intercontinental Hotels Group 

A final FTSE 100 share that I feel should continue to rebound strongly is Intercontinental Hotels Group (LSE: IHG). Just like the other shares I’ve mentioned, its value was walloped by the coronavirus last March as lockdowns came into force. No tourists or business travel, no trade.

Since then, we’ve seen some green shoots. In October, the business behind brands such as Regent and Crowne Plaza posted a 53.4% drop in third-quarter revenue per available room. This was actually an improvement on the 75% drop endured in Q3. Occupancy levels also rose from 25% to 44%. Should Intercontinental reveal a further improvement to trading next month, I think the share price should rise accordingly.

Let’s not forget though, such firms have been hit hard by the pandemic and will take time to fully bounce back. But in better times, IHG has shown itself to be a quality operator. It usually generates decent margins and high returns on the capital it invests. I can see those good times returning. A resumption of global travel, should boost the shares.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares of Burberry. The Motley Fool UK has recommended Burberry, Diageo, and InterContinental Hotels 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.

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