The six long-term winners I'd buy for a post-Covid-19 world

Professional investor William Meadon of the JPMorgan Claverhouse Investment Trust picks six solid stocks that have held up well through lockdown and will benefit from a wider economic recovery.

We see light at the end of the tunnel following the Covid-19 pandemic. While there are still significant hurdles to face before “normal” life can resume, we are optimistic that the long-term outlook for the UK is one of sustained growth.In the short term, growth may be uneven as markets across the globe begin to find their feet. British stocks are well placed to benefit from this wider recovery, although residual Brexit headwinds remain. 

We believe that many of the key drivers and themes that have accelerated over the past year, such as online retail and home improvement, will remain in place. We therefore remain focused on the long term, seeking out companies with strong balance sheets, consistent cash generation and resilient business models. 

Housebuilders have solid foundations

We have been long-term advocates of housebuilders, with companies such as Persimmon (LSE: PSN), Barratt Developments (LSE: BDEV) and Bellway(LSE: BWY) all forming part of our portfolio. While many companies were forced to suspend dividend payouts this year, housebuilders, who were able to restart operations in April and May, got back on track quickly. Persimmon, for example, was one of the first housebuilders back in production and managed to provide a special dividend to investors over the summer. 

Many housebuilders entered this crisis with strong balance sheets. This is largely down to good management teams that have weathered previous market downturns and, as a result, emerged stronger. Many of these companies remain compelling, trading on single-digit multiples based on their earnings forecasts for next year, and should be able to maintain their dividends in the next year. 

First among financials

When it comes to the financial sector, life assurers often stand out for their higher-quality loans and reduced exposure to interest-rate volatility. Banks tend to have greater exposure to consumer and small business-lending, which is often the first portion of the credit market to see rising default levels during recessionary periods. 

Since the onset of the pandemic, many of Britain’s largest banks have cancelled their dividends due to regulatory pressures. On the other hand, Legal & General (LSE: LGEN), Phoenix Group (LSE: PHNX) and Prudential (LSE: PRU) have kept paying dividends – a welcome development in a world where yield is scarce.

A retailer with roaring online sales

The retail sector faces a number of challenges, but we see opportunities among operators with a strong online presence and those catering to the growing theme of home improvement. Bricks-and-mortar retailer Dunelm (LSE: DNLM) was already taking market share before lockdown. 

Others in the sector are struggling to keep up in terms of product offering, technology and marketing spend. To survive and thrive as a retailer, data and technology are key. The company’s newly upgraded website has benefited from significant investment, and online sales are up by 100% year-on-year. Dunelm’s sharp focus on value for money also resonates with its customers and, as the economic backdrop remains uncertain, it should further benefit the company.

Recommended

Best savings accounts – January 2023
Savings

Best savings accounts – January 2023

Interest rates on cash savings are making a comeback. We look at the best savings accounts on the market now
27 Jan 2023
The High Income Child Benefit Charge - is it the most illogical, unfair and unnecessary tax?
Personal finance

The High Income Child Benefit Charge - is it the most illogical, unfair and unnecessary tax?

We may not like taxes, but this one is blatantly unfair, penalises middle income earners and adds to the gender pensions gap, says Kalpana Fitzpatrick…
27 Jan 2023
Share tips of the week - 27 January 2023
Investments

Share tips of the week - 27 January 2023

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
27 Jan 2023
Rents across the UK rise to record highs
Personal finance

Rents across the UK rise to record highs

Rightmove’s latest rental trends tracker shows tenants are facing record price increases
27 Jan 2023

Most Popular

House prices could fall 30%. Should investors be worried about a repeat of 2008?
Investments

House prices could fall 30%. Should investors be worried about a repeat of 2008?

Some analysts are predicting that house prices could fall as much as 30%, which, when compared to the fact that prices have jumped 28% since April 201…
24 Jan 2023
State pension age could rise to 68 as early as 2035 – what it means for you
State pensions

State pension age could rise to 68 as early as 2035 – what it means for you

State pension age increases could be accelerated, with the change to 68 coming in as early as 2035, affecting those who are 54 and under today.
25 Jan 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

New interest rates will be announced on 2 February – we look at what to expect.
26 Jan 2023