How I’d find the best shares to buy now for 2021

Peter Stephens
·3-min read
Person using calculator next to charts and graphs
Person using calculator next to charts and graphs

Deciding which companies are the best shares to buy now for 2021 is clearly very subjective. However, they’re likely to be those businesses that have the capacity to overcome short-term threats to prosper from a likely stock market recovery over the long run.

By focusing on company fundamentals, their growth strategies, and searching in sectors unfavoured by other investors at the present time, it may be possible to unearth the most appealing buying opportunities for 2021 and beyond.

Finding the best shares to buy now to survive the short term

The best shares to buy now could be those UK stocks with the financial means to overcome a tough period for the economy. Although a stock market recovery could take place in 2021, and the economy’s outlook may improve, there’s also a decent chance that more challenges will be ahead.

In fact, risks such as Brexit and coronavirus are unlikely to disappear in the early part of next year. As such, companies with solid finances may stand a better chance of surviving further difficulties in their operating environments.

Assessing a company’s financial strength is always a good starting point when investing. However, it may be even more relevant at the present time. Businesses with low debt levels, substantial interest cover when making interest repayments, a low proportion of fixed costs, and access to large amounts of liquidity may be less risky than their peers. They may prove to be among the best shares to buy now ahead of a potentially challenging 2021.

The best stocks to deliver growth in a market recovery

The best shares to buy now are likely to have strong long-term growth prospects. For example, they may have a wide economic moat that provides them with a more attractive growth profile over the coming years. Or they could have a sound strategy to expand into new markets through acquisitions or innovative new products.

Although an economic downturn may mean higher risks in the short run, it can be a logical time to make major changes to a company’s business model while sector peers could be struggling. As such, the best stocks to purchase today may be those companies that have the capacity to use their competitive advantage to adapt to changing consumer tastes and evolving market conditions in 2021.

Buying stocks in unfavoured sectors

In terms of where to start looking for the best shares to buy now for 2021, some of the biggest bargains may be in unfavoured sectors. Investors appear to have flocked to a narrow range of industries, while many others, such as oil & gas, travel & leisure and housebuilders, remain somewhat unpopular.

In many cases, companies operating in those industries have solid fundamentals and long-term growth potential. While that may not be realised in 2021, from a long-term investment outlook they could have significant appeal.

The post How I’d find the best shares to buy now for 2021 appeared first on The Motley Fool UK.

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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.

Motley Fool UK 2020