What are the best UK shares to watch in 2021?

UK shares in 2021: key themes

The key themes for 2021 are going to be a main player in which shares are the best to watch. We’ve included three areas below that could be worth keeping an eye on:

• The Brexit transition and how well British and European businesses adapt to a post-Brexit European market
• The Covid-19 rebound and which shares might perform well in 2021 – see our analysts’ predictions about the likely shape of a post-pandemic economic recovery
• The restrictions or lifting thereof on UK cannabis companies – the UK is the largest supplier of medicinal cannabis in the world, and some of these companies are making their stock market debut in 2021

UK shares to buy in 2021: our analysts’ picks

We asked our market analysts for their top picks for 2021. You’ll be able to see what they think below.

Chris Beauchamp, IG chief market analyst: Ashtead Group

As the US moves into full-on recovery mode now that a vaccine has arrived, and incoming president Joe Biden promises to ‘build back better’, equipment hire firm Ashtead Group appears well-placed to benefit from a surge in US construction activity.

The shares rebounded from their Covid lows and have continued to hit new all-time highs, but there seems no sign that momentum in this star performer on the FTSE 100 is about to slow.

Josh Mahony, IG senior market analyst: Barratt Developments

The UK housing market has enjoyed its best year since the 2016 referendum result, with demand hamstrung in the years that followed. However, the stamp duty holiday has helped ease years of declining activity, with a sharp rise in demand sparking a 6.6% annual rise into December 2020 (Rightmove HPI).

The year ahead brings plenty of uncertainty for the sector, with the March stamp duty holiday meaning that this temporary boost will disappear just as the UK leaves the European Union (EU). As such, the housebuilders could be in for a bumpy road as we kick-off 2021 with plenty of questions over exactly how the UK economy will look in the post-EU world.

Rightmove speculate a healthy 4% rise in house prices over 2021, yet the truth is that the economic fallout from Brexit will be very difficult to forecast given the number of unknowns involved. For the optimists, the idea that we can finally turn Brexit fear into a quantifiable reality could free up a fresh bout of demand once things settle down. The housebuilders will no doubt see plenty of volatility in the year ahead.

However, while first quarter (Q1) 2021 could be difficult as the stamp duty holiday and Brexit factors drive risk aversion, there is a good chance we could see the sector finally freed from the shackles of Brexit uncertainty. Barratt Developments are the largest housebuilder in the country, and they have already enjoyed a welcome boost from the wave of vaccine announcements in November 2020. However, the stock was still 25% below its pre-crisis levels, there is still some hesitancy as we head towards the new year.

With many speculating that the government would react to any house price weakness in Q1 as a reason to extend their support, there is a good chance we could see that initial volatility minimised. As such, it looks like an important year ahead for the stock and the housing sector as a whole.

How to buy UK stocks

1. Create or log in to your trading account
2. Search for the stock you want to buy
3. Set your trade size
4. Take steps to manage your risk
5. Open and monitor your position

UK dividend shares in 2021

The top UK dividend shares in 2021, based on our analysts’ estimates are:

1. M&G
2. Imperial Brands Group
3. Evraz

See our full list of the top UK dividend shares in 2021

UK penny stocks in 2021

The top UK penny stocks in 2021, based on their share price increase in 2020, are:

1. Galantas Gold Corp
2. Maestrano Group
3. Wishbone Gold

See our full list of the top UK penny stocks in 2021

UK tech stocks in 2021

The top UK tech stocks to watch in 2021, according to their share price volatility in 2020 and our analysts’ assessment of their overall company outlook, are:

1. Ocado Group
2. Halma
3. Games Workshop

See our full list of the top UK penny shares in 2021

UK value and blue-chip stocks in 2021

The top UK value and blue-chip stocks in 2021, based on their market cap on 25 November 2020, are:

1. AstraZeneca
2. HSBC
3. GlaxoSmithKline

See our full list of the top UK value and blue-chip stocks in 2021

UK cannabis stocks in 2021

The top UK cannabis stocks in 2021, based on the companies that are already listed on either the London Stock Exchange (LSE) or alternative investment market (AIM) and those which could be listed soon, are:

1. GW Pharmaceuticals
2. Canopy Growth
3. Aurora Cannabis

See our full list of the top UK cannabis stocks in 2021

Best UK shares to watch in 2021 summed up

• Certain themes will affect stock market performance in 2021 – either for better or worse
• The Brexit transition, the shape of a Covid-19 rebound and certain niche opportunities – like the listing of certain medicinal marijuana companies in the UK – could all be ones to watch
• Some main areas to watch are UK dividend shares, UK penny stocks, UK tech stocks, UK blue chip stocks and UK cannabis stocks
• To take a position on these sectors and the companies in them, you’ll need a trading account
• Share dealing lets you take direct ownership of the underlying shares, and you’ll profit from any upward movements in the stock’s price
• Trading lets you take a speculative position on a stock’s price movements. This lets you go long to speculate on it rising, or short to speculate on it falling