It’s too soon to say that a new bull market has started. The Covid-19 crisis rolls on and vaccine rollout problems, along with the emergence of new virus strains, could well put paid to an economic recovery. Consequently, there’s a big danger that UK share prices could turn southwards yet again.
That said, I have my eye on several British stocks I think could soar in value during the economic upturn. Here are a couple on my Stocks and Shares ISA radar today.
Catalytic colossus
I’m tipping platinum group metal (or PGM) producer Tharisa’s (LSE: THS) profits to rise strongly as the economic recovery takes hold. Consumer spending should rise across the board when conditions improve. Spending on cars in particular tends to rocket during the early stages of the economic cycle. This naturally bodes well for PGM-packed autocatalyst demand.
Prices of Tharisa’s product might not just increase because of recovering industrial demand, however. Rising concerns over soaring inflation during the economic recovery could also push uptake of hard currencies like precious metals.
There’s also the possibility that the US Federal Reserve will keep stimulus measures rolling and interest rates locked around record lows. This would have a negative impact on the US dollar. And in turn this would make it more cost effective to buy dollar-denominated commodities like the PGMs. Incidentally, the greenback just struck a three-week low against a basket of other major currencies.
All that said, there’s a major threat to UK platinum-producing shares like Tharisa. Electric vehicle sales are soaring all over the globe and are predicted to keep rising. This threatens to put a dent in autocatalyst production in future years, an industry which accounts for around 40% of total platinum demand.
City analysts think Tharisa’s earnings will rise 98% in 2021 though. As a result the mining giant trades on a low forward price-to-earnings (P/E) ratio of 5 times. Like all forecasts, this estimate could change based on future developments. So I have to bear this in mind.
A top UK tech share
A bumpy economic recovery would have huge ramifications for business investment. And this could have a significant impact on providers of IT services. That said, I don’t think demand for Kape Technologies’ (LSE: KAPE) services will suffer in the short-to-medium term.
This is because this UK share is an expert in the field of cybersecurity, an area on which companies are obliged to spend increasing amounts. The rate of online crime is rising so rapidly, in fact, that the US Labour of Bureau Statistics reckons employment of information security analysts will balloon 31% between 2019 and 2029. This, unsurprisingly, makes it one of the fastest-growing industries in the States.
It’s not all perfect, of course. City brokers reckon Kape’s annual earnings will fall fractionally in 2021. This leaves the business trading on forward P/E multiple of 21 times. That’s not the highest valuation among UK tech shares. But it’s a lofty-ish reading and therefore is a risk. It means that I could see a share price correction if trading at the company deteriorates.
