I’ve been looking for UK shares I think could grow this year. Here are four UK shares I’d pick, hoping to see capital appreciation, in 2021.
My growth picks
There are some UK shares I’d buy now with an eye on future growth.
I like digital ad agency S4 Capital for its strong leadership, grasping the moment to benefit from shifts in ad spending patterns. It is my share pick for 2021 and I expect to see growth across the year. It has continued its acquisition spree this year, picking up an agency in China, which it sees as a key growth market. I’ll be looking at the annual results in April to see how the three-year plan to double profits is progressing.
S4’s valuation roared ahead in 2020, but acquisitions cost money and dilute shares. A lot is riding on its leadership and vision, which for a young company like S4 remains a risk.
Domino’s Pizza already pays a dividend, but the main attraction of these UK shares to me is future growth prospects. The chain is now focused on the UK and Ireland after pulling out of some mainland Europe markets. I think that is positive because the UK has been its strongest market for many years. The pizza purveyor has a strong position but continues to grow revenue, which ticked up 17.5% like-for-like in the most recently reported quarter. Centralised facilities should show improved marginal benefit as the shop network grows.
Of course, we don’t know how pizza demand will look once life returns to normal. The reopening of pubs and restaurants will give consumers more choice than a takeaway pizza, so the recent strong sales performance won’t necessarily be repeated in future.
Still room for recovery
I’d also consider some shares whose prices have yet to shake off the pandemic impact.
The residential market in the UK continues to be very strong. The average UK home price hit a record high in December. Yet some shares that have links to the health of the housing sector still languish below where they sat before the pandemic rocked markets.
High street bank Lloyds is a household name I recently put on my list of UK shares to buy. It is the country’s biggest mortgage lender. That strong position isn’t fully reflected in the share price, in my view, which is why I’ve bought in. The bank has regulatory permission to restart dividends, which could be a fillip to the share price.
That exposure to the mortgage market could be a liability, however, if the recession leads more borrowers to default. There is also no guarantee that the dividend will restart this year.
Brickmaker Ibstock is still around 30% below its pre-pandemic price. But building levels remain high, which should be good for demand in the coming years. I like the fact that Ibstock has its own network of clay mines. That gives it a sustainable competitive advantage. However, the company is still yet to show a full business recovery. Second-half revenues fell less than in the first six months, but were still down 10%. Any property market downturn could negatively impact both Ibstock and Lloyds.
Some shares might underperform, but armed with the right information and a diversified portfolio, I’d be confident picking these UK shares to buy and hold in my own portfolio.
