There’s a broad range of issues plaguing UK share investors’ confidence today. Fears over the Brexit process and its impact on the domestic economy have been at the forefront in recent days. Of course, questions remain over the Covid-19 vaccine rollout and its effectiveness. This will dictate whether economic conditions — and by extension the performance of UK share prices — will improve or deteriorate in 2021.
Let’s look at things through the eyes of a glass-half-full investor, though. And let’s say we agree with the predictions of the Organisation of Economic Co-operation and Development, for a sharp global economic rebound next year. The organisation reckons GDP growth in G20 countries will recover from a 3.8% fall in 2020 to bounce 4.7% higher in 2021.
Which UK shares could be in line to soar during any upcoming stock market rally? Here are two top stocks I’d buy in my Stocks and Shares ISA for 2021 and hold for years:
#1: A UK share for growth AND dividends
People spend more and more on their pets nowadays. It stands to reason that spending on non-essentials like toys and grooming will pick up should broader consumer spending rebound in 2021 too.
This makes Pets at Home Group (LSE: PETS) a terrific UK share for the new bull market. This business is a one-stop shop for everything your furry friends need at home. It provides other services like vetcare too. So in my opinion it’s in the box seat to enjoy excellent market growth next year and beyond. The number crunchers at Statista reckon the global petcare market will expand at a compound annual growth rate of 5.9% through to 2026 and be worth £328bn by the end of the period.
Previous Covid-19 disruption means that City analysts reckon Pets at Home’s annual earnings will fall by a tenth in the financial year to March 2021. But they also think earnings will rocket 30% in fiscal 2022. This leaves the UK share trading on a corresponding price-to-earnings growth (PEG) ratio of just 0.6.
#2: A fashion favourite
Food and fashion colossus Associated British Foods (LSE: ABF) is another top stock whose share price could soar in 2021. I’m particularly encouraged by how its Primark budget clothing stores have performed since Covid-19 lockdowns have eased and what this means for the future.
As analysts over at Hargreaves Lansdown have recently commented: “Future growth opportunities (particularly in the US) and weaker competitors mean the group could emerge from this crisis in a better position than it started.” The investment giant has also noted that basket sizes at Primark in recent months have been higher than they were a year ago. And that “suggests a longer-term positive trend,” it says.
ABF is expected to enjoy a 37% earnings rise this fiscal year (to September 2021). This leaves the UK share trading on a PEG ratio of just 0.6, making it a brilliant value buy.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.