It’s not a good time for NS&I. MPs have asked the organisation, which runs Premium Bonds, to account for poor service levels. The chances of winning big money were also slashed last year, denting the bonds’ appeal. In my opinion, buying Premium Bonds is just gambling. On the other hand, investing in growth shares is a decent way to build wealth.
That’s why I’m on the lookout right now for shares that have major growth prospects in 2021.
A top growth share for 2021
D4T4 (LSE: D4T4) is involved in the increasingly important and growing field of data. It’s involved in commercially important activities such as collecting, managing and extracting value from that data. As the world goes digital, demand for services like these will only increase.
Against this backdrop, I think D4T4 looks cheap on a trailing P/E of 26. That’s significantly higher than just a few months ago but I think the share price could rise much further. It’s also significantly below other tech companies.
I like D4T4 because of its strong finances. Gross profit margins have been growing and most recently stood at over 60%. The group has no debt and is not a flash in the pan, fad-type business. It’s a serious business poised to generate, in my opinion, substantial returns for shareholders.
D4T4’s five-year return on capital employed is 18% – an indicator that the company can grow profitably. It’s a very important metric in my view.
All in all, I think it’s a hidden gem with huge share price growth potential. It could well enter my own portfolio in the coming months.
A lowly-rated miner with growth prospects
Sylvania Platinum (LSE: SLP) is another share with a bright future. It’s a low-cost producer of platinum group metals (PGMs), which are platinum, palladium, and rhodium. It mines in South Africa, where the world’s greatest source of PGMs is located.
It benefits from strong metal price trends and limited competition. Sylvania Platinum will also benefit from the speeding up of the transition to cleaner, more energy-efficient vehicles.
It’s another group that’s debt free – which is impressive for a miner – meaning improvement to the top line will trickle down into greater returns for shareholders. This is especially so as the miner has been able to cut costs recently.
I expect the share price could do very well in 2021. Especially as the shares are cheap on a P/E of just eight.
Lloyds: set for recovery from a disastrous 2020?
If you prefer a Covid recovery stock then I’d suggest Lloyds Banking Group. 2020 was a year to forget for investors in bank shares. Nonetheless, even in a very low-interest-rate world, and even with the threat of negative interest rates looming, I think Lloyds should bounce back. I hold a small amount because the shares have such a low valuation. I think the share price falls and fears over the future of banks are overdone.
I expect all of these growth shares to have a strong 2021, but my top pick of the group is D4T4.
Andy Ross owns shares in Lloyds Banking Group. The Motley Fool UK has recommended Lloyds Banking Group. 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.