Three top investors hope for share gains in the year ahead

After a bad year, many investors will be hoping for better luck in 2021. Will the rollout of a Covid vaccine trigger an economic recovery and a rebound in share prices, or is there more trouble to come on the stock markets? 

Here, three City experts give their tips for the year. Each has given a recommendation for brave investors who are prepared to take a risk, and one for the more cautious. 

As the last 12 months have reminded us in vivid fashion, shares can go down as well as up. Following tips always involves the risk of losing some or all of your money and it is a good idea to do your own research before investing. 

Andy Bell, chief executive, AJ Bell

FOR THE CAUTIOUS: GLAXOSMITHKLINE (1342p) 

Covid-19 has reminded the world about the importance of pharmaceutical companies. GlaxoSmithKline offers investors under-appreciated growth and its shares look better value than many of its peers. 

The company is also preparing to spin off its consumer healthcare division into a joint venture with Pfizer’s, a move which should unlock value. 

GlaxoSmithKline has a strong pipeline for cancer drugs and there are high hopes for recently approved ovarian cancer drugs Zejula and for Blenrep, which treats multiple myeloma, a type of bone marrow cancer. 

It is also a big player in the vaccine market with strong positions in childhood jabs, meningitis and the flu. A small delay to its Covid-19 vaccine is a slight disappointment but we could still see a final product submitted for approval in the second half of 2021. 

The company is forecast to make an £8billion pre-tax profit next year, illustrating how this is a strong business with earnings generated from multiple products – separating it from the more speculative developers whose fortunes lie on the success or failure of a single drug. 

FOR THE BRAVE: JD WETHERSPOON (1116p) 

The leisure sector has found life difficult in 2020 with huge disruption to trading. 

Notably, pubs have found it very hard to operate normally with restrictions on opening hours and conditions on what and how customers can order. 

Many aren’t going to survive, which means the strongest players in the market could get even stronger. 

Wetherspoons has survivor written all over it and stands to pick up market share thanks to its competitive advantages. 

Its large pub sites enable it to adhere to social distancing rules far better than your typical local where space can be tight. Wetherspoons also benefits from buying power so it can sell food and drink at lower prices, something that will be important in a period where unemployment is rising. 

Wetherspoon’s shares could be in demand if society starts to reopen. However, any delays to rolling out the vaccine could weigh on market sentiment towards the business, so the shares are only suitable for more adventurous investors who understand the risks. 

Janet Mui, investment director, Brewin Dolphin 

FOR THE CAUTIOUS: DISNEY ($181.18) 

A number of traditional businesses stand to benefit from the revolution in technology – and one of them is Disney. 

It has accelerated its digital reach and sales capabilities and has been a clear beneficiary of the rise in popularity of streaming. 

Its launch of Disney+, an American subscription video on-demand streaming service, illustrates that technology has been great for traditional businesses which have been willing, and able, to adapt their business models. 

Disney may also benefit when life goes back to normal after widespread vaccine distribution in the coming years, particularly when its theme parks are able to reopen at full capacity.

FOR THE BRAVE: ALIBABA ($232.60) 

Chinese tech firms like Alibaba, the Hangzhou-based multinational company which specialises in e-commerce, retail, internet and technology, offer exposure to technology and diversification from the FAANG stocks in the US – Facebook, Amazon, Apple, Netflix and Google. 

Alibaba stands to gain from a rapidly expanding domestic market and has less competition and little threat from overseas competitors as Western rival apps are mostly banned in China. The government’s support to drive consumption and self-sufficiency in technology will be a tailwind for e-commerce firms like Alibaba. 

US-China tension is likely to fuel further tech decoupling. With that in mind, China is expected to support its domestic champions and provide more private investment into technology. 

The company also has lots of growth potential outside of China, especially in Asia. A good way to get exposure to a company like Alibaba is through a fund such as Morgan Stanley Asia Opportunities, which invests in a number of similar companies, including Tencent Holdings.

2020 WAS A YEAR TO FORGET 

Stock tipping is never easy – and so it proved for our experts in 2020. The Covid-19 pandemic turned the world – and the financial markets – on its head. 

Just two of the six tips our experts picked last year made money. That was Breedon, the independent building materials company that The Share Centre’s Richard Stone recommended for the brave and insolvency firm Begbies Traynor picked by Andy Bell for the cautious. 

The rest of the tips – like much of the FTSE All-Share, which is down 12 per cent this year – remain firmly in the red. 

Vodafone and Hargreaves Lansdown struggled while along with the rest of the banking sector, HSBC suffered. 

The biggest casualty from last year’s tips was British Gas owner Centrica, which crashed out of the FTSE 100 over the summer and is down 49 per cent on the year.

Justin Urquhart Stewart, co-founder, Seven Investment Management 

FOR THE CAUTIOUS: VODAFONE (120.94p) 

There is a common theme with our relationship with our phones – we seem to love them, but often loathe the operator. 

It is not really very surprising as although the technology maybe brilliant, most of the providers seem to have missed out on a customer service chip. 

One such is Vodafone. Although it is a global provider and a leading FTSE 100 company, it has never really set the world alight as a great investment. 

Its £28billion debt has also been a burden. However, recently it agreed to sell off its European telecom mast business which will go a long way to reducing that pile by bringing in about €20billion. 

It also really does have global reach and is especially strong on its commercial side for business. As the economic crisis passes, this behemoth will still be there and still be paying a dividend. 

So although I may complain about service, this actually looks a solid company to buy at a discounted price. 

FOR THE BRAVE: TRACSIS (640p) 

Just look at the transport issues around us and view the chaos. This is a UK firm, spun out of the University of Leicester, providing software management for rail and freight transport. 

Some not too impressive figures recently reflect the current malaise in the industry, but the company has built a credible story of steady growth with a good management team. 

Earlier this year, it acquired iBlocks, a smart ticketing software specialist which handles back office stuff. Sexy? Not really, except for railway geeks, but it is a key part of the system. 

Recently the chief financial officer sold a chunk of his holdings which is never very encouraging. 

The guidance has been towards lower earnings as a result of Covid, which is hardly unexpected. That said, the margins are holding up well, which I take as a positive. 

The share price is now 640p, 23 per cent off its peak of 830p and the company has cash in the bank, so if you’re ready to take a risk, Tracsis could be just the ticket. 

This post first appeared on Dailymail.co.uk