I think the best growth shares to buy for 2021 are those firms that may be able to capitalise on the reopening of the economy. Of course, nothing is ever guaranteed when it comes to the stock market and economic conditions. These companies might be able to outperform, but they may also struggle.
There’s no guarantee that just because I think these firms will capitalise on the reopening, they will. Companies will always face hidden risks that may not be clear today but could hold back growth.
So, keeping that in mind, here are five growth shares I’d buy for 2021.
I think there are currently some incredible bargains in the financial sector. On that basis, I would buy Secure Trust Bank and OSB for my portfolio in 2021.
The pandemic has had a significant impact on the financial sector. However, the effect has been nowhere near as bad as expected. Policymakers’ decision to act quickly and flood the market with money to prevent insolvencies has worked well (so far).
As the economy begins to open up again, companies like Secure Trust and OSB should be able to capitalise on the recovery. This could drive impressive earnings growth for the year, potentially turning the firms into sought after growth shares.
These businesses face some significant risks as well. If the recovery does not take off, as expected, they could suffer additional losses. That would put pressure on the corporations to reduce lending, holding back growth. Financial companies can also be challenging to analyse, so these may not be the best assets for all investors.
Best shares to buy for 2021
Other companies that may benefit from the recovery are landscaping group Marshalls and construction materials business Breedon.
The government has already laid out plans to spend up to £100bn over the next few years on infrastructure projects. That could translate into high demand for aggregate and instructional materials, which would be good news for Breedon.
Simultaneously, Marshalls’ management has said the company’s earnings for 2020 and 2021 would surpass expectations, thanks to the UK’s booming housing market.
These companies are optimistic about the future, but the construction industry is highly cyclical. The industry’s fortunes can change from year to year, which makes picking growth shares incredibly difficult. Marshalls and Breedon could outperform over the next 12 months, but they may quickly begin to struggle if the industry turns.
With many consumers stuck at home for much of the past 12 months, online shopping has boomed. Watches of Switzerland, in particular, has seen a significant increase in the demand for luxury watches.
I believe this trend will continue. That’s why I would buy this stock as part of a basket of growth shares. Consumers have been happy to spend throughout lockdown, but I think many have held back and will be more willing to spend when the clouds of uncertainty have lifted. That could help the firm generate big profits in 2021.
Still, this is a retailer, and retail in the UK is notoriously difficult. Watches of Switzerland faces many risks, such as cheaper competitors, high rents, high business rates, and rising wages.
Rupert Hargreaves has no position in any of the shares mentioned. 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.