These 10 stocks should shine in 2021, analysts say

Picking sharemarket winners is tricky at any time, let alone during a pandemic. Five experts share their top choices for 2021.

Aussie shares are expected to build on their strong second half of 2020 as economies recover from the pandemic this year.

Some stocks are tipped to do much better than others, and several that struggled during the early months of coronavirus lockdowns should be among 2021’s top performers, according to sharemarket specialists.

Here’s a look at what investment analysts see as the brightest share opportunities this year.

1. MACQUARIE GROUP

Portfolio manager Chris Conway, from investment newsletter Marcus Today, said Macquarie was on top of his list because of its infrastructure business.

“They are now the biggest infrastructure asset manager in the world with half a trillion dollars of assets under management,” Mr Conway said.

The company would benefit from cheap debt, distressed assets coming up for sale and a global economic recovery.

“Everything’s lining up nicely for Macquarie’s infrastructure business – it generates 75 per cent of their revenue and profit.”

Macquarie Group CEO Shemara Wikramanayake oversees the world’s biggest infrastructure asset manager.

2. NANOSONICS

This company makes automated sterilisation equipment and has overcome some of the supply and sales issues it experienced earlier this year amid COVID lockdowns.

“Coming out of COVID, now is not the time to scrimp on sterilising probes,” Mr Conway said. “It’s a great Australian company with patented technology.”

3. MONASH IVF

Mr Conway said it was estimated that 16,000 IVF babies would be born in Australia in 2021 – one in 20 newborns – as demand soared following elective surgery shutdowns during the pandemic.

“There’s a lot of pent-up demand there and it’s already coming back,” he said.

4. LIFE360

The company’s app has 25 million members worldwide and allows people to check their loved ones’ locations in real time, monitors their driving and delivers other family safety services.

Bell Direct market analyst Jessica Amir said Life360, cloud solutions company Rhipe and buy now, pay later giant Afterpay were among companies benefiting from pandemic-created behavioural trends “that are here to stay”.

5. INGHAMS GROUP

Ms Amir is also a fan of chicken producer Inghams.

“As hospitality restrictions ease, that is likely to see sales continue to rise,” she said.

Inghams chicken sales are tipped to peck … er … pick up this year. Picture: Australian Chicken Meat Federation

6. NICKEL MINES

The company’s share price has trebled since March and Ms Amir said it was “definitely one to watch”.

“Nickel Mines is likely to continue to see earnings and share price growth supported by China’s plan to double the size of its economy in 15 years,” she said.

“Nickel Mines has a collaboration with the world’s largest producer of stainless steel.”

7. RESMED

T. Rowe Price head of Australian equities Randal Jenneke said medical device maker Resmed was seeing improving and normalising business conditions.

“We believe the company is well placed to return to strong growth in its sleep apnoea business over the next six to 12 months,” Mr Jenneke said.

8. SEEK

As job numbers improve during the economic recovery, employment and education giant SEEK should benefit. Mr Jenneke described SEEK as a “quality growth stock”.

9. BANK SHARES

Ausbil chief investment officer Paul Xiradis said banks were one of the best opportunities to benefit from an improving economy.

Banks were still trading below long-term valuations and had “experienced less delinquency and bad debts than first thought”, Mr Xiradis said.

“With leniency recently expressed by regulator APRA in terms of dividends, we expect a resurging banking sector to return to paying more normalised dividends on the bank of a resurging economy in 2021,” he said.

Baker Young managed portfolio analyst Toby Grimm said he believed the banks “offer value going forward”.

Westpac is its preferred pick right now. “It’s trading at a significant discount to its closest peer The Commonwealth Bank,” Mr Grimm said.

Bell Direct market analyst Jessica Amir says be careful with companies exposed to Chinese consumers. Picture: Jonathan Ng

10. COMPUTERSHARE

Baker Young recently increased its holding in this share registry company.

“The level of capital raisings and corporate activity is a positive for their registry communications and services business,” Mr Grimm said.

Longer term, rising interest rates would help Computershare as it held large sums of money on behalf of companies and investors, and there was also takeover activity in the sector, he said.

STOCKS THAT MAY STRUGGLE

Companies that soared in value during 2020 are the ones seen by investment analysts at greatest risk of a reversal.

Iron ore stocks such as Fortescue Metals Group fit in that camp, after its share price surged thanks to a booming iron ore price, while fellow strong performers Xero and Afterpay sit in a similar position.

“I don’t like betting against momentum, but it’s certainly hard to justify the expansions of some stocks based on sentiment,” Mr Grimm said.

Mr Conway said some retail, e-commerce and buy now, pay later stocks that enjoyed a “meteoric rise” during the pandemic now appeared expensive – including Kogan, Redbubble, Afterpay and J.B. Hi-Fi.

“We will be avoiding them for a while because there’s no value there and they won’t replicate what pushed their sales forward during COVID-19,” he said.

Ms Amir suggested avoiding companies exporting to Chinese consumers that had been affected by reduced demand, such as A2 Milk and Bubs Australia, or been hit by import bans, such as Treasury Wine Estates.