The year ahead promises to be an interesting one for the stock market. While many analysts remain concerned about an imminent sell-off, others are far more optimistic. Some even believe we could be in for a strong stock market rally.
Either way, I’ll be keeping my eye on a handful of shares throughout 2021 to determine whether they represent worthwhile investments. Today, I’ll discuss two that I think are among the best to buy for my portfolio in coming year.
An exciting UK tech stock
Multinational IT infrastructure services company Computacenter (LSE: CCC) has expanded rapidly over the previous five years. Earnings growth has been outstanding, which is an indicator of a growth stock with solid potential.
Such growth has been reflected in its meteoric share price rise, which now stands around 195% higher than it was in 2016. That figure represents an annualised return of around 39%, well outperforming the FTSE 250 index.
Last year’s lockdown restrictions caused a boom in business for the IT firm, which saw revenues and profits rise substantially. In fact, in a recently released trading statement, the company reported an 8% increase in group revenue.
That said, it won’t be straightforward for the company to carry this momentum moving forward. Furthermore, the shares are on the expensive side, with a price-to-earnings ratio (P/E) of around 26.
However, the company’s essential IT services are in demand by businesses across the globe. What’s more, Computacenter has capitalised on this by completing recent acquisitions in the US and France.
With that in mind, I rate Computacenter shares a buy for my portfolio. To me, the company’s growth potential amply justifies the hefty price tag.
Making the most of market volatility
The second UK share I’m considering is CMC Markets (LSE: CMCX). I think the provider of online and mobile trading services has performed exceptionally over recent years and could profit handsomely from a stock market rally in 2021.
Like Computacenter, CMC has witnessed its valuation skyrocket, rising by 231% in just two years. Despite this, the company’s shares trade on a forward P/E ratio of 13, which indicates an element of value in my eyes.
Last year, the company posted record first-half results as the Covid-19 pandemic boosted activity. What’s more, this strong trading performance shows no sign of letting up anytime soon. Last week, the online trading platform highlighted that full-year net operating income is set reach the upper end of market forecasts thanks to a continued strong performance.
However, CMC’s continued success will rely on attracting and retaining a high level of both retail and institutional clients, which could prove to be unachievable.
Nevertheless, CEO Peter Cruddas has stated that the company has a healthy range of projects in the pipeline, which could provide a catalyst for further growth in 2021 and beyond. As such, regardless of whether the stock market rallies this year, I’m confident CMC shares could provide a neat return. With that in mind, I’d buy and hold for the long term.
The post 2 of the best UK shares I’d buy for the 2021 stock market rally appeared first on The Motley Fool UK.
Matthew Dumigan 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.
Motley Fool UK 2021