2020 was highly volatile for stocks because of the pandemic, and many shares have bounced back the lows of last spring. But some share prices remain weak because their underlying businesses have been affected more by the more surges of the virus.
Investors brave enough to buy stocks near their lows last year will have done well on many of the big tech stocks like Zoom and Apple. However, now that vaccines are rolling out, we think there’s an opportunity to buy stocks to hold for the long term, and we could see a general bull market throughout this year.
Its worth filling your portfolio with investments backed by high-quality underlying businesses. Many great companies listed in London have the potential to thrive in the coming years, and as an investor in their shares, I’d expect to benefit from an increasing dividend income stream and capital gains from a jump in value. Of course, those benefits are not guaranteed. Investing in shares always carries an element of risk. For example, the underlying businesses may not perform as expected and their share prices could fall, but you should aim to reduce the risk by researching companies based on value and quality signals.
Vodfone, currently priced at is worthy of such research. The business enjoys the advantage of owning infrastructure networks that are hard for competitors to replicate. But three years ago, the valuation was high, making the stock look expensive. However, the share price eased back since then and now the stock looks like better value to us. Vodafone has a decent record of cash flow generation, and City analysts expect the firm’s earnings to rebound in the trading year to March 2022. There’s a fat dividend yield above 5% and potential for the business to grow.
We are also keen on insurance and investments company Aviva and groundworks and geotechnical solutions specialist Keller. Both firms are paying big shareholder dividends right now, and we think they have the potential to grow their operations in the years to come. However, those two enterprises operate in cyclical sectors, so time your entry carefully. Aviva still has plenty of room to recover from its pandemic highs, so now could be the perfect entry point.