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UK shares: 2 stocks I’d buy for 2021 and beyond

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It’s still January and now is a good time to review my UK shares. I want to make sure that my investment portfolio is in good shape for the road ahead in 2021.

Part of my strategy to identify worthwhile UK shares is to focus on companies with strong brands and an online presence. Two that are on my radar are Next (LSE: NXT) and The Hut Group (LSE: THG). Here’s why I’m eyeing up them up.

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#1 – Next 

Most people would run a mile from retailers, but Next seems to have fared well during the coronavirus pandemic.

Although this company has retail stores, 50% of its revenue comes from online sales. While the stores have been shut, Next has been able to make up for lost revenue online. E-commerce is a large part of the retailer’s strategy and I expect this to grow going forward.

The retailer offers a diverse range of products and I think has a very strong brand. Its overseas sales are growing too. This shows that there’s international demand for Next’s products it can exploit. I expect the company to capitalise on this international opportunity, which should prove positive for the shares.

While the stores have remained shut, Next hasn’t neglected them. In fact, it has done a good job in managing its store estate. The shops typically have shorter and more favourable leases than those of its peers. Next’s stores are also focused on retail outlets outside city centres, which have done better during the pandemic.

The recent Christmas trading update was positive with home, loungewear and sportswear doing well. It even forecast a year-end reduction of £487m in net debt. For all these reasons I’m positive over the long-term prospects for Next.  

#2 – The Hut Group

Not many UK shares listed on the London Stock Exchange through an initial public offering (IPO) in 2020. But The Hut Group did in September making it the UK’s biggest technology IPO as well as the largest London listing since Royal Mail in 2013. Since then, the shares have done well and I expect this to continue well into 2021.

The Hut Group has three divisions, two of which are THG Nutrition and THG Beauty. These two segments operate various wellness, sports nutrition and beauty brands such as MyProtein, LookFantastic and GlossyBox. Most of THG’s brands are in-house, which means that the profitability on these sales will be higher than their third-party counterparts.

THG Ingenuity, the third division, develops and operates third-party e-commerce websites using its in-house software. Ingenuity’s growing list of reputable partners includes Nestlé, PZ Cussons and L’Occitane.

I think the real jewel in the crown is the Ingenuity software and I expect great growth potential from this division. The software business model is close to the Amazon Web Services solution, but on a much smaller scale and it’s only concentrated in the e-commerce space.

The Christmas trading update was strong and saw growth across all areas of the business. The Hut Group has now reinvested the proceeds from the IPO and purchased companies especially within the US beauty sector to grow the business.

So what do I think is ahead for this stock? More of the same, I believe, growing the brands and commercialising the Ingenuity platform further. For these reasons I’d buy The Hut Group shares today.

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Nadia Yaqub has no position in any of the shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK owns shares of Next 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.

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