At the beginning of the year, I curated a best-stocks-to-buy list of companies that I think could do well this year. This included a number of UK shares that I think are well positioned to see share price growth if the UK economy recovers.
It has been suggested recently by the Governor of Bank of England that the vaccine rollout could mean an economic bounce-back relatively soon. This give me some optimism. All the more so given the stock market struggled at the end of January so shares have generally become cheaper.
So what shares are on the list?
The bank that makes it onto my list of best stocks to buy
There are a number of shares that could bounce back this year from the pandemic-induced slump. But foremost among them, I think, is Natwest Group (LSE: NWG). The shares are cheap according to a price-to-earnings ratio of only around six. This gives it, in my view, plenty of potential for future growth.
The potential to reintroduce dividends is another appealing aspect to the bank’s shares at the moment. The balance sheet appears strong with a lot of capital and buffers in place, so regulators could relax rules in the coming months, potentially.
However, I’d be wary of the potential for the government could sell its stake in the bank, which could act as a brake on the share price. I’m also concerned that, if the economy doesn’t bounce back, banks, including Natwest, would likely be among the biggest fallers.
Overall though I’m positive about the bank’s prospects, based largely on the potential for the UK economy to recover and grow. Natwest remains high on my list of best stocks to buy.
A hotel group that has weathered the Covid-19 storm well so far
Shares in Intercontinental Hotels (LSE: IHG) have bounced back very strongly since around this time last year. Yet I think positive sentiment around the company if travel opens back up again this year could drive the share price on further.
IHG has strong brands, managing Holiday Inn, Crowne Plaza, and Intercontinental, which should help maintain its value. On top of that, it’s a franchise operation, which means lower costs than traditional hoteliers. That’s helped it through the worst of the pandemic. It’s even remaining profitable. That seems like quite some feat as demand for hotel rooms has been so low for almost a year.
The pandemic does mean that debt is growing, so that’s a risk that investors need to be aware of. Net debt is 2.4 times the level of cash profits (EBITDA) at the end of 2019. The shares are also not cheap, so if the pandemic worsens, the share price fall could be steep.
I remain optimistic though. In my opinion, the franchisor is well run and has the financial firepower to make it through any extended lockdowns. That’s why the share remains high on my list of best stocks to buy.
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Andy Ross owns no share mentioned. The Motley Fool UK has recommended InterContinental Hotels 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.