Throughout 2020 we have been faced with numerous challenges. Challenges that we haven’t seen for decades. If you’re a UK investor you will have been faced with arguably two of the biggest challenges you can be faced with. A global pandemic and trying to leave one of the biggest trading blocs in the world, in the same year.
Although this has caused some chaos in markets and for some investors may have been detrimental to their portfolio. I like to look at the positive side of such things. This year there have been opportunities like no other, plenty of millionaires were made this year from investing and not just people who bought the dip at the bottom on the 23rd march.
I have a couple of companies that I think will make a resurgence in mid to late 2021 and I’ll tell you why.
The great pandemic of 1918. This scenario in history is fairly similar to what we’re going through now. A flu based virus that went worldwide and destroyed lives and economies. That being said, what came after the great pandemic in 1918? The roaring 20’s. Now many factors contributed to the roar of the roaring 20’s but one main factor was that people could go out again. The pandemic was over and they wanted to go and live their lives, spend their money, dress up, have a drink and just go to town.
This is relevant because I believe that we will experience something similar. Furthermore as we are more technologically and scientifically developed than our predecessors in 1918, I think our recovery from the pandemic will be quicker and stronger. Hence why I think mid to late 2021 could be the time for our roaring 2020’s or at least the beginning of it. That is why I’m holding and looking to add to my position in JD Wetherspoons (JDW.L), I also think out of all the leisure and hospitality sector this company could be king, and I’ll tell you why.
Wetherspoons own most of their pubs where they operate, moreover they own a significant amount more pubs than their rivals Greene King, and not to mention they serve food and alcohol at a lower price than anyone else. This is important for a few reasons. Reason one is that some people have managed to save money from this pandemic because they’ve been furloughed but have no way of going out and spending it, this can leave to individuals with pent up demand and capital to complement it. Reason two is the contrary, some people have not fared well at all throughout this pandemic and have fallen through the cracks in the governments mismanagement of 3.5 million self employed people. The reason why these people with less money are important is because, these people will choose to go to Wetherspoons over anyone else because Wetherspoons is the cheapest option, and if these people fancy going out once this pandemic is over, guess where they’ll be?
The second main reason is, socialisation. The pubs that Wetherspoons own are large venues. Compared to normal pubs, Wetherspoon pubs are massive, this means you can get a lot of people inside them and if needs be they are capable of socially distancing better than their rivals. People have missed socialising with their friends and family, and people have missed going out. Once people are allowed to go back to the hospitality sector with relative freedom, one company will be the clear winner.
Wetherspoons is still trading at roughly 40% lower than its pre covid price. With it being a dividend paying company in normal times, this could be a great comeback investment of the near future.
The second company I think that could be a great investment in the coming years is GCP student living (DIGS.L) This company is a REIT and focuses on student accommodation in London. You may be thinking what has this got to do with COVID and why is it a good idea? Well, hear me out and make your own opinion. The share price has been battered this year because students have either left uni because of the pandemic or either didn’t go or postponed it for a year. The lead to the company having less rent each month in their accommodation units.
How will things turn around? My bet is just like the Wetherspoons example, once this pandemic calms down and things get back to normality (Hoping that the vaccine does in fact work and we can increase the weekly production of it) then students will return to uni and in fact there will probably be an increase of students going to uni because of the roaring 20’s effect. Students will want to get out of their homes and go and live their lives, and what better place to go and do it than London. Furthermore, the increase of international students coming to the UK is increasing year on year, especially at London based universities. All these factors combine to make the discounted share price of DIGS look quite attractive in my opinion, that and the fact that the quarterly dividends are still getting paid make it very interesting for the value investor.
Both of these investments present potential growth and income opportunities in my opinion.
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