The UK stock market looks set to end the year on a high after the Tories’ election win and progress in US-China trade talks alleviated the uncertainty that has weighed on markets for months.
But the road ahead is far from clear, with the looming Brexit date of 31st January and various upcoming trade negotiations just some of the potential snags. Looking ahead to 2020, City A.M.’s editorial team have picked the stocks they think will fare well in the coming year.
Please leave any presumptions you might have about financial journalists having good instincts when it comes to spotting winners at the door. Given that the team’s picks for 2019 included Thomas Cook (rest in peace) and Burford Capital, these predictions should come with a pretty hefty disclaimer.
Nevertheless, if you are willing to throw caution to the wind as we enter the new decade, here are our UK stock picks for 2020. Act on them at your own peril.
Alex Daniel, Transport and industry reporter
Rolls-Royce – The blue-chip stalwart has suffered in recent years after one of its jet engine models started misbehaving, grounding jets across the globe. However, the firm has been on the road to recovery since 2016, and a turnaround plan is on course to start bearing fruit imminently. With a new decade comes new opportunities, and the only way is up for the marquee British manufacturer.
Easyjet – Summer has come early for the low-cost carrier, which was just dusting off its sunglasses and getting ready to restart its package holiday business when the industry’s biggest name, Thomas Cook, hit the wall. Market share is up for grabs and – contrary to popular belief – package trips are thriving, with bookings up 15 per cent in the last five years. With its offering of cheap-as-chips flights and a bed near the beach, Easyjet looks like it’s on to a winner.
Andy Silvester, Deputy Editor
Diageo – A strong performer for years and one set to continue on an upward trend. 2019 acquisitions of rising non-alcoholic brand Seedlip and prepared cocktail maker Tipplesworth suggest a firm that is still bang on trend with consumer preferences, and a new variant of Guinness being rolled out across a host of growing African markets could well give a further boost if it lands. There’s no reason to think the booze maker will experience a 2020 hangover.
Aberforth – A (potential) end to Brexit uncertainty should see the UK economy get a modest bounce, but it’s challenging to judge which sector might benefit most, so a value fund that has its tentacles right across the economy seems a solid pick. A focus on smaller firms leaves them less liable to currency fluctuations and trade wars. Aberforth are optimistic about the coming years, and you can see why.
Edward Thicknesse, Energy and mining reporter
Centamin – All that glitters is not gold, but with Centamin you can be confident you’ve got your hands on the real thing. The gold miner recently rejected a £1.5bn all-share takeover offer from Endeavour, but don’t expect the Canadian corporation to stop there: the smart money’s on bidding wars in 2020, as consolidation in the gold market continues. With a current dividend of nearly five per cent, and no debt on the balance sheet, this could be one to watch for 2020.
AA – Investors breathed a sigh of relief in December as the motoring association announced a possible buyback of shares in 2020, after picking up speed through 2019 after a profit warning in April. With an update to come in February, here’s hoping the brakes are well and truly off as we head into the new year.
Emily Nicolle, Night editor and tech editor
Ocado – Once tipped to be 2018’s top performing UK stock after a stellar rise, Ocado had some setbacks following a disastrous fire at its Andover warehouse that cost the retailer around £100m. Since then the industry starlet, deemed more of a technology company than a grocer, has gotten back on track. It has a number of major licensing deals with US supermarket giants in its back pocket, and now the future is only getting brighter with the promise of several new robotic warehouses on the horizon.
Greggs – Who doesn’t love a vegan sausage roll? I know – I think they’re better than the real deal. Greggs had a fantastic 2019 as it led the way for food retailers creating plant-based alternatives to traditional fare, and there’s rumours of a vegan steak bake now in the works. Even its chief executive is pondering going meat-free, showing real dedication to the cause. Shareholders have been convinced so far, with Greggs’ stock value rising more than 60 per cent since January. Galvanised by the trending movements of veganism and climate change, Greggs is showing some true staying power heading into 2020.
Harry Robertson, Economics and markets reporter
Wizz Air – As every good investor will tell you, a strong portfolio is not complete without a low-cost Hungarian airline. The performance of airlines is closely linked to the state of the economy, so with some luck a pick-up in European growth after a torrid 2019 will give this one a boost. But one must dodge hubris when it comes to holiday industry stocks. It could take flight, or it could crash and burn.
Redrow – After Boris Johnson emphatically broke the ‘red wall’, some much-needed fiscal stimulus should be on the way. Companies in infrastructure and construction stand to benefit, and homebuilder Redrow is likely to also do well from the chronic mismatch of supply and demand for homes that doesn’t look like it’s going anywhere.
James Warrington, Media, telecoms and marketing reporter
Haynes Publishing Group – Motoring enthusiasts will think fondly of Haynes’s classic car manuals, which have been the staple of the publishing group for the last 60 years. But the Somerset-based company has recently been steering towards digitisation and its commercial offerings, and the benefits are starting to show. Strong trading has driven shares up almost 50 per cent in the last six months and with further innovations in sight, the growth shows no signs of slowing down.
WPP – It’s been a rocky year for media giant WPP, which has felt the impact of all-powerful tech giants and new, more agile digital advertising rivals. But a series of disposals, including the $4bn (£3bn) Kantar sale, have helped slim down the sprawling empire, and acquisitions are now back on the agenda. With Sir Martin Sorrell firmly in the rearview mirror, new boss Mark Read can now start to get WPP back on track, and 2020 could be prove to be a turning point.
Josh Martin, News editor
Persimmon – The supply squeeze on housing hasn’t magically been solved as the Brexit beast sucked all the political attention will and money in Westminster. Housebuilders were badly hit after the EU Referendum result in 2016 as the economy wavered, however the fundamentals of the market remain – desperate would-be homeowners and not enough houses. Thankfully, Persimmon builds houses! The threat of a hard-left labour government subsiding and a no-deal Brexit threat dissipating should boost Persimmon further, having already indicated a more reassuring outlook for completions, selling price and margins.
JD Wetherspoon – Polo shirt connoisseur and Brexiter pub baron Tim Martin may not want a deal with Brussels but he’s got them every day of the week for punters at their local Spoons. The recipe of cheap pints and fast food has been a Great British success story and his company will no doubt benefit from Boris Johnson’s administration in 2020. Beer duty is set to keep falling and long-needed business rates reform should benefit the company’s vast estate. Although anaemic GDP figures could squeeze consumer spending, Spoons’ reputation as a by-word for “cheap date” should see it shielded more so that bougie counterparts.
Sebastian McCarthy, Chief City reporter
Berkeley Group – In what has been a turbulent year for Britain’s housebuilders, Berkeley Group has not caused many jitters. Cash is still king for founder Tony Pidgley, the property veteran who has forged a reputation in the industry for calling the ups and downs of cycles. Recent comments from Pidgley suggest he thinks a rebound will emerge in the London housing sector, which if proved correct, would give upmarket Berkeley a much-welcomed boon.
Shaftesbury – West End landlord Shaftesbury has many reasons to be cheerful; unlike many of its peers, this property giant is sitting on an estate that is largely still in demand from occupants. While the Carnaby Street owner recently posted a decline in the value of its portfolio for the first time in a decade, Shaftesbury is still able to shrug off the high street woes that so many of its fellow landlords are facing.