We here at The Motley Fool reckon now’s a brilliant time to invest. That’s very well and good, you might say. But do I really want to spend my hard-earned cash when the economic outlook remains fraught with danger? Sure, there are plenty of cheap UK shares out there following the 2020 stock market crash. Their cheap valuations, though, reflect the high risks they face as the Covid-19 crisis rolls on, right?
It might be reassuring to know that writers like myself at The Motley Fool have continued investing despite the murky economic picture. I myself have bought UK shares in my Stocks and Shares ISA after the stock market crash. There were simply too many quality companies going much too cheaply to miss out on. I think these companies will rocket in value once the economy recovers and the new bull market roars into action.
Here are two top UK shares I went bargain hunting for in 2020. And this is why.
#1: A UK share with stunning brand power
2020 hasn’t been the best year for Coca-Cola HBC (LSE: CCH). It bottles and distributes Coca-Cola products (and others) and its revenues took a significant whack as Covid-19 lockdowns smacked demand for its drinks from the ‘on the move’ and hospitality segments. Things could remain difficult for the soft drinks specialist in 2021 as the coronavirus variant forces more restrictions across the globe.
As a long-term investor I viewed CCH’s share price drop in 2020 as a brilliant dip-buying opportunity. And particularly as the UK share traded on a historically low price-to-earnings (P/E) ratio of below 15 times. Excluding tech giants like Google, Amazon and Apple, Coke is the most valuable brand on the planet. Who wouldn’t want to grab a slice of this via a UK-listed share at recent prices? Its product will remain in high demand long after you and I are gone. Aside from this, I’m excited by its recent move into fast-growing areas like low-calorie and energy drinks. I reckon Coca-Cola’s profits will soar this decade.
#2: Levelling up
I’d had my eye on Games Workshop Group (LSE: GAW) for a long time. Its stunning performance amidst the broader retail sector meltdown encouraged me to take the plunge in 2020. This magnificent niche share earned more profit in the first half of this fiscal year than it did in the entire previous 12 months. Its ultra low price-to-earnings growth (PEG) readout of below 1 added an extra sweetener for me.
Games Workshop makes its fantasy wargaming products and sells them through its network of shops and online. It has complete control of the process, allowing it to maintain high standards of quality whilst giving it the chance to build a strong and committed fan base. The business has a stronghold on the British market but its influence on international shores is growing rapidly (it now sources 70% of sales from abroad). Yet it’s still hardly scratched the surface on foreign shores.
With royalties also set to boom as it lends its IP to movie studios and game developers, I think this UK share is about to move to the next level.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Royston Wild owns shares of Coca-Cola HBC and Games Workshop. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Amazon, and Apple and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.