It is easy to dream of returns from shares way ahead of the market. In practice it can be difficult to match, let alone beat the market. Over the past year, for example, the FTSE 100 index is down 2.5%. That means a lot of constituent shares show a negative return in that period.
In this article my ambition may therefore sound modest but in fact is ambitious. I have picked five UK shares I think could add 20% to their share prices between today and later this year.
Reopening shares for growth
The end of lockdown could bode well for some reopening shares.
C&C Group owns drinks brands like Magners as well as a wholesale distribution business. Pubs reopening should mean a significant boost to revenues. This month, it said it looks to the current financial year “with increased optimism”.
I think the brand portfolio should help C&C capitalise on pent-up demand in the on trade. However, the pandemic has put pressure on its finances. The impact of reopening may take time to show and indeed, some pubs may never regain their former patronage levels.
WH Smith shares are up 87% over the past year. However, they have stumbled lately and lost 12% over the past couple of weeks. I think this could be a buying opportunity. More commuting should mean higher footfall in station stores. Its airport locations should also benefit as flight passenger numbers climb. Any further delays to reopening could hit the shares, though. I also wonder whether a shift to digital reading during lockdown could permanently hurt its sales of physical media.
UK shares with digital growth stories
It’s no secret I have high hopes for S4 Capital. Last year these UK shares more than doubled. But since December they have been in a trading pattern where share price growth seems to have paused. Tomorrow the agency is due to release full-year results.
Executive chair Martin Sorrell has already said these will show like-for-like growth during the pandemic “at the north end of the market’s estimates”. I think the growth story could propel the shares up 20% this year. But the shares treading water may portend a shift in sentiment. The digital ad space is very crowded and S4 is only one of many players.
A potentially more surprising pick for a digital growth story among UK shares is Morrison’s. The pandemic has seen many shoppers move purchases online. Morrison’s may trade on its traditional image but it is no digital slouch. In its peak trading period towards the end of last year its online sales more than tripled.
The digital growth story could help shares appreciate further this year. But a downside is that due to delivery costs, digital sales are often less profitable for retailers than instore sales.
Shifting investor sentiment
Tobacco shares have been out of favour in recent years. That has driven prices down. Lately, though, I think some investors have been bargain hunting. I know I have.
British American Tobacco is up 11% over the past year. But I continue to see some possible upside. With its growing revenue, increasing profits, and 7.4% yield I still think these UK shares are undervalued. However, it could be hard to keep growing profits when tobacco use is declining. Many ESG investors shun tobacco stocks, reducing demand.
