As the New Year begins, it seems like the perfect time to look for prospective investments. With Covid-19 lockdowns and vaccines still dominating, looking at the year ahead is more difficult than ever. The world will hopefully look very different in 12 months time. With all this in mind, I consider what I think are the two best shares for my portfolio in 2021 right now.
What I consider to be the ‘best shares’
To clarify, exactly what constitutes the ‘best shares’ of 2021 is subjective. Here I don’t name the two stocks I think may have the largest overall growth. Personally, I think the coming year is just too risky for that.
For my own criteria, I always prefer investments that pay out dividends as well capital gains. That said, I am looking for a decent returns of course. In these uncertain times the best shares for me are those I think will minimise risk, while maximising potential gains.
With the market the way it is, BP (LSE: BP) is my number one choice right now. I believe it has been undervalued because of last year’s low oil prices, but this could be set to change.
The crude market was already in a precarious position when Covid-19 hit. A large amount of overcapacity had oil prices on the precipice of collapsing. When the coronavirus took over the world, it was the last straw for crude.
However, as the vaccines starts to reduce Covid-19 fears through 2021, oil should benefit. In addition, the world’s great oil producers (OPEC and Russia particularly) are likely to cut production to bolster prices. Just today, Saudi Arabia announced its intention to do just that.
With its price this low, BP is currently yielding a dividend of about 8%. For me this is too good to turn down, and makes it one of my best shares for 2021.
The second of my best shares for 2021 is the pharmaceutical giant AstraZeneca (LSE: AZN). Naturally, this is linked to the Covid-19 vaccine, but only slightly.
AstraZeneca is not making any profits from its vaccine directly, so the impact on the bottom line will be negligible — at first. However, it does seem ever more likely that a vaccination programme will continue for a long time. In this case, AstraZeneca should benefit for years to come.
Similarly, the problems of Covid-19 are likely to bring greater attention to pandemic prevention and vaccination programmes. I think the pharmaceutical industry as a whole will benefit in 2021.
I have one major caveat for AstraZeneca though – the risk of the vaccine programme going wrong. While vaccines are being produced and distributed on schedule, everything will be fine. Given the complexities of this situation, it is not impossible some things could go wrong with the vaccination programme. If that were to happen, I think fear would weigh on Astra’s price.
Despite this risk, I think AstraZeneca is still a solid choice as a long-term investment. I believe its price is cheaper today than it will be in the months to come, making it the second of what I consider the best shares for 2021.
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Karl has shares in BP and AstraZeneca. 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.