The economic outlook for 2021 remains fraught with uncertainty. Huge questions over the efficacy and the rollout of Covid-19 vaccines suggest danger for the global recovery. The high chance of a no-deal Brexit and ongoing trade disputes by other major economies also threaten to choke off a sharp snapback. The near-term profits outlooks for plenty of UK shares are still hard to judge.
But let’s say that the economic rebound next year is strong and sustained. Which UK shares could soar in value as a result? Here are two stocks which could thrive in 2021:
#1: A top UK financial share
Financial services firm AJ Bell (LSE: AJB) is a UK share I’m tipping to deliver long-term profits growth. In an era of poor returns from traditional cash products it stands to gain as savers seek better returns on their money. It could benefit from a solid economic rebound in 2021 and a subsequent pick-up in investor appetite, too.
AJ Bell’s impressive momentum was underlined in early December’s latest financial update. Total customer numbers soared 27% in the 12 months to September, to 295,305, helping assets under administration to rise 9%. Pre-tax profits rocketed by almost 30% from fiscal 2020 as a result.
Promisingly AJ Bell has a terrific knack for hanging onto new customers, too. Its client retention rate remained north of 95% in the last fiscal year. No wonder that the business feels confident enough to raise charges on its Youinvest platform on some of its products from 1 January. These moves could give profit growth an extra shot in the arm. I’d happily buy this UK share in my own ISA today.
#2: Reassuringly expensive? Or just too pricey?
A solid economic rebound in 2021 would play perfectly into the hands of jewellery giant Watches of Switzerland Group (LSE: WOSG) too. Sales of luxury goods always rise considerably when broader consumer spending levels pick up. However, recent trading data suggests that this UK share will thrive even in the event of a lumpy economic recovery.
Revenues had slipped 3.4% during the six months to October, Watches of Switzerland declared last week. This was quite a robust result given the impact of Covid-19 lockdowns on store openings. Indeed, online trade is ballooning right now and e-commerce sales surged 65.4% higher in the first half. Consequently adjusted profit rose by more than a quarter year on year.
Its exploding share price means that it continues to trade on a sky-high forward price-to-earnings ratio north of 2,000 times. Profits could well explode next year should the economic landscape improve. The recent Covid-19 vaccine breakthough also bodes well, as wealthy shoppers seeking a luxury shopping experience are likely to flock through its doors once more.
But at current prices I’m happy to invest elsewhere. After all, there’s no shortage of quality UK shares for stock pickers to choose from today, many of which continue to trade at rock-bottom prices after the 2020 stock market crash.
Royston Wild 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.