The Motley Fool

4 reasons why I think buying Rolls-Royce shares could double my money in 2021

Image source: Getty Images

In December, a lot of investors start turning their eyes to 2021. I’ve been doing this as well, trying to find which stock could have the potential to double my money during this period. From looking at Rolls-Royce (LSE:RR) shares, I think it could be a candidate for delivering high returns.

Rolls-Royce shares have the potential to possibly double in value as they’re starting from a low base, I feel. The share price spent most of the year falling in value, as the pandemic hit the business hard. So from a standing start at 130p, the share price could double to 260p. If it did, it would be back at levels seen in November of last year. Doubling my money wouldn’t mean the share price would have to break all-time highs, or grow profits to impossible figures never seen before. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

External factors: vaccine progress

Although we need to tread with careful optimism, the recent vaccine news sounds very positive. Here in the UK, the first batches have already arrived, and will be distributed to the NHS this week. The boost to Rolls-Royce shares was seen when the news first broke last month. I wrote about how the share price jumped over 35% in a single day

Should the vaccine rollout be smooth and successful, I’d expect the share price to continue to move higher. The business will be an indirect benefactor of the aviation sector seeing higher demand from consumers. During Q2, Rolls-Royce reported a 75% reduction in engine flying hours. If the vaccine enables more people to fly, and engine flying hours increase, Rolls-Royce will perform a lot better.

Internal factors helping Rolls-Royce shares

In the short term, the news in June about cutting 3,000 jobs at the business wasn’t seen as a positive. However, I expect Rolls-Royce shares to perform strongly into next year as the overall restructuring and cost-cutting starts to benefit the business. On top of the job cuts, the business had saved costs of £350m by the end of H1. It expects to have cost mitigations of £1bn by the end of the year. This size of cost-cutting enables the firm to be more financially secure. After all, profit is simply revenue minus costs. If revenue is low but costs are also low, profits won’t be harmed as much as we might think.

The final reason I think Rolls-Royce shares could have strong upside potential is its management’s strategy. Recently, senior executives made it clear that cost-cutting is part of a larger restructure of the entire business. Director Simon Burr said last week that “we don’t rule ourselves out of any part of the market today because evolution in the 2020s could be really quite exciting.” This has led to some believing Rolls-Royce could go back to making engines for smaller aircraft. 

The business is also shifting focus back towards the nuclear and defence departments. As this year has shown, demand here is more reliable than in the aviation part of the business.

Rolls-Royce shares could be standout performers for 2021, I think, and are firmly on my watchlist in the short term.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.