How to rebalance the portfolio and stay on track in 2021?

Summary

• 2020 has been a difficult year for many of the LSE listed firms. Even the large-sized and usually well-performing companies saw their stocks plummet to record low levels under the pandemic pressure.
• A few of such firms have made a good recovery over the last few months and are expected to outperform in 2021 as well.
• Investors who have rebalanced their portfolio during this year to adapt to the market might want to do so again, as the markets could drastically readjust as the pandemic’s threat subsides in 2021.

Portfolio rebalancing is the practice of selling off share of some companies contained in one’s portfolio and buying of new ones based on the reviewed risk and return profile of such businesses.

It involves raising or lowering the proportion of money invested in different stocks accordingly.

At the same time, there are pros and cons of portfolio rebalancing.

Redoing this exercise frequently might lead to higher transaction cost, eating into the investor risk.

On the other hand, without rebalancing, an investor may either lose an opportunity or is unable to escape an avoidable risk.

After the market crash at the LSE during March this year, several investors rebalanced their portfolios to avoid any pitfall and take advantage of the exceptionally good bottom-fishing stocks.

However, now that things look rosier with an effective vaccine in sight soon, it is time to think rearranging again.

Apart from that, another major event scheduled for early 2021 is expiry of the Brexit transition period.

This event will have big ramifications across the British industries that will surely translate into volatility in stock prices accordingly.

Therefore, a rebalancing of investor portfolio is the need of the hour.

Below we look at five stocks that could add to value creation in 2021 if an investor includes them in his portfolio.

1. Ocado Group plc – (LON: OCDO) Ocado plc’s joint venture with Marks & Spencer has turned out to be a tremendous success. The JV entity by the name Ocado Retail Ltd has seen significant revenue traction in September this year when it started operations.

It is likely that the JV will continue to rake in higher revenue growth during the next year.

Source- Thomson Reuters (one-month share price chart)

The shares of the company were trading at GBX 2,302.00 on the London Stock Exchange on the close of trade on 20 November, shedding 1.20 per cent over the previous day’s close.

2. Barratt Developments plc – (LON: BDEV) It is one of the largest housing development companies in the United Kingdom. Since the reopening of the first lockdown, the housing sector has been on an expansion spree despite most other sector reeling under the pandemic induced slowdown. 

The stocks of the company have seen growth over the past 6 months, and they might continue to grow at least till the end of March 2021 when the stamp duty holiday scheme of the government expires.

Source- Thomson Reuters (one-month share price chart)

The shares of the company were trading at GBX 650.00 on the London Stock Exchange on the close of trade on 20 November, losing 0.37 per cent over the previous day’s close.

3. GlaxoSmithKline plc – (LON: GSK) GSK along with French pharmaceutical giant Sanofi is developing a COVID- 19 vaccine that is in its advance stage of clinical trials.

Because of much media attention that the AstraZeneca vaccine is getting, it shares have risen exponentially over the past few months.

However, the vaccine of GSK Sanofi combine will hit the market within a short period of the AstraZeneca vaccine and will also be able to garner revenues. As and when that happens the share of the company would gather steam and give good returns to investors.

Source- Thomson Reuters (one-month share price chart)

The shares of the company were trading at GBX 1,393.60 on the London Stock Exchange on the close of trade on 20 November, 0.01 per cent lower as compared to the previous day’s close.

4. Gamma Communications plc – (LON:GAMA) The company’s performance over the past few years has been exceedingly well. During this year, the company has been able accelerate on its organic as well as inorganic development efforts despite the challenging business environment.

The company has a strong financial position and did not put any of its employees under the government’s furloughing scheme and paid all its taxes.

The management of the company hoped that it will be able to continue with the same level of performance for the rest of the year as was witnessed in the first half. The company might continue with its current performance in 2021 as well.

Source- Thomson Reuters (one-month share price chart)

The shares of the company were trading at GBX 1,610.00 on the London Stock Exchange on the close of trade on 20 November 2020, gaining 2.25 per cent over the previous day’s close.

5. Antofagasta plc - (LON:ANTO) On 22 July this year, the company came out with its half yearly production report. 

Despite the challenges faced because of the COVID- 19 crisis the company has been able to reach very close its production guidance for the half year valued at 371,700 tons and was able to lower its costs by 6 per cent because of a weaker Chilian peso.

Source- Thomson Reuters (one-month share price chart)

The shares of the company were trading at GBX 1,135.00 on the London Stock Exchange on the close of trade on 20 November 2020, jumping by 3.46 per cent over the previous day’s close.