Rolls-Royce (LSE:RR) is having a tough year, but the promise of an imminent vaccine has revived its share price from a decade low of less than 40p in October to £1.29 today. Buyers at the low have not just doubled their money, but more than tripled it! But that’s what volatility can do. It can also halve my money if I’m not careful.
As for Rolls-Royce in 2021, buying the shares at today’s price may well lead me to double my money. But it’s not all plain sailing from here on out, and as a potential investor, there are quite a few things I need to consider.
Should I buy Rolls-Royce shares now?
The name Rolls-Royce is synonymous with quality engineering. It’s a company with a strong heritage and close ties to the British establishment. Unfortunately, Rolls-Royce shares have been hammered by Covid-19 and are racking up an increasing pile of debt to help it ride out the storm. This is worrying, and while investors have been backing the company in recent weeks, a prolonged downturn could mean further volatility for Rolls-Royce shares. With negative earnings and no dividend yield, there’s not much to appeal to a value investor other than hope. It can begin earning again as soon as flights are back to business as usual, but this is likely to take time.
It’s selling its civil nuclear instrumentation and control business to French company Framatome. This doesn’t include its civil nuclear business or its small modular reactor plans, which may be a good thing. It’s recently floated the idea of creating 6,000 jobs in the next five years on the back of a plan to build 16 small nuclear reactors. While nuclear power is a highly controversial area, it has the potential to tackle the climate crisis. This is because it can create cost-effective clean energy. I think I probably could double my money with Rolls-Royce, but it will take time and it may not happen in 2021. There may also be less volatile options available. I like the chances of Rolls-Royce lasting for the long term, but I’d require nerves of steel to buy these UK shares just now.
Can I double my money with Numis?
Numis (LSE:NUM) is a £356m company. It operates as an independent institutional stockbroker and corporate advisor to public and private companies. The Numis share price has a volatile history, but 2020 has been fairly steady, other than its sharp crash and speedy recovery from March to May. Considering the economic uncertainty facing the world and especially Britain, I think businesses will continue to seek professional guidance. With that in mind, I think its outlook for 2021 is good too.
Since November 1, the Numis share price has climbed nearly 14%. In its investment banking division, M&A activity is likely to keep increasing and IPOs remain surprisingly popular. It has a price-to-earnings ratio of 11, earnings per share are almost 30p and its dividend yield is 3.8%. After the conclusion of Brexit, the UK government wants Britain to continue to be the financial hub of excellence it’s renowned for. I think this will bode well for Numis in the coming years. I don’t know if I can double my money with Numis shares in 2021, but I’d consider buying them as a long-term investment and for the dividend.
Kirsteen 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.