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I think these UK shares could deliver big gains in 2021

Edward Sheldon, CFA
·3-min read
Chart displaying growth
Chart displaying growth

In recent years, interest in UK shares has been very low. Due to Brexit uncertainty, big institutional investors have avoided the UK market and this has kept share prices depressed.

But things appear to be changing. Now that Brexit’s done, money is flowing back into the UK stock market. This is illustrated by the fact that the FTSE 100, the UK’s main stock market index, rose more than 6% last week.

Here, I’m going to highlight two UK shares I believe have the potential to deliver strong gains in 2021 as sentiment towards the UK market continues to improve. These two stocks have underperformed in recent years but now look to have their mojo back.

UK shares: this stock has the potential to rise

The first UK stock I’m bullish on is Hargreaves Lansdown (LSE: HL). It operates the UK’s largest investment platform. I think it should benefit from an increased interest in investing and trading. It should also benefit from higher stock prices as a large chunk of its fees are generated from assets under management.

Hargreaves Lansdown’s business held up really well last year. In October, for example, the company reported revenue growth of 12% for the three months ended 30 September. Meanwhile, a few months earlier, in its August full-year results, the group increased its dividend significantly and declared a special dividend. This robust performance hasn’t been reflected in the share price however. Currently, the stock is still well below where it was at the start of 2020.

Hargreaves Lansdown isn’t the cheapest stock around. Currently, it sports a forward-looking P/E ratio of about 30. But I don’t see that valuation as a deal-breaker. This is a high-quality company with a lot of growth potential in 2021 and beyond. I’d snap up the stock today.

Demand for this company’s offering is high

Operating in a similar field is St. James’s Place (LSE: STJ). It’s the largest wealth management advice group in the UK. I expect this company, and its stock, to do well in 2021 for two reasons.

Firstly, the financial environment is extremely complex today. This means demand for trusted financial advice is high. Secondly, like Hargreaves, it should benefit from higher UK and global share prices as it earns fees from assets under management.

STJ’s most recent trading update, for the three months to the end of September, was very encouraging. Funds under management closed the period at a record £119bn, up 5% on the figure a year earlier. Meanwhile, year-to-date funds retention rate was a high 96.4%. This performance highlights the strength and resilience of the business.

This stock has had a good run since March. The share price is back to where it was pre-Covid-19. I expect it to keep climbing in 2021 however. The forward-looking P/E ratio of 24, while not a bargain, isn’t overly excessive, in my opinion.

The post I think these UK shares could deliver big gains in 2021 appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Hargreaves Lansdown and St. James's Place. The Motley Fool UK has recommended Hargreaves Lansdown. 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