It’s even more heartening to see that despite the crash and burn year of 2020, they are posting positive developments. 

Here are three that encourage optimism for 2021, making them great shares to buy for now:

#1. Morrison Supermarkets — growth and dividends for this FTSE 100 stock

The FTSE 100 supermarket, Wm Morrison Supermarkets (LSE: MRW), like the other grocers, has seen a discouraging share price trend in the recent past. But its share price has fallen so much now that I think there could be room for gains in 2021. 

It already started making gains in the stock market rally that began in November.

A few days ago, it posted a Christmas update, which has clearly gone down well with investors too. With a price-to-earnings ratio of 16.6 times, it also looks more attractive than many other shares that have run up sharply in the recent months. 

Moreover, it pays a dividend. With a dividend yield of 3.7%, this is I’d consider both as a growth and dividend investment. In fact, it announced a special dividend as well for the second half of the year.

#2. Rentokil Initial — strong demand continues

The FTSE 100 hygiene and pest control services provider Rentokil Initial (LSE: RTO) has been more than resilient through the past year. While many others have unfortunately floundered, it has made some gains. This has shown up in its latest update, where it reports that profits could be higher than expected. 

It has also made a slew of acquisitions in the US, which should bode well for its revenues going forward, going by the size of the economy and its good prospects for 2021.  

Unlike MRW, it hasn’t yet started paying dividends. It terminating them after the stock market meltdown in March. Yet, what it lacks in income generation, it makes up for in growth.

I made a case for RTO in March when it had just stopped dividends. It’s share price has jumped more than 50% since. I think it’s likely to rise further from here, so I have it on my good share to buy list. 

#3. Barratt Developments — optimism about 2021

The FTSE 100 housebuilder Barratt Developments too has posted a positive trading update recently. Even though it acknowledges the support received from government policies and continued uncertainties because of both Brexit and Covid-19, it’s quite confident about 2021.

It’s also planning to resume dividends shortly.

Also, there’s a possibility that the stamp duty holiday will be extended beyond the 31 March deadline. 

Investors have reacted well to this latest update and I think here, too, there’s further room for gains. It has an earnings ratio of 18 times, which isn’t low, but it isn’t the highest around either. Further, its share price is still way lower than it was at the start of 2020, making it a share to buy for me. 

The post Shares to buy in 2021: 3 FTSE 100 shares I’d buy for great returns now appeared first on The Twelfth Magpie.

More reading

• How smart investors cashed in on yesterday’s stock market rally
• Will we see a catastrophic stock market crash this year?

Manika Premsingh owns shares of Rentokil Initial. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The opportunity 

Bioventix (LSE:BVXP) is a biotechnology company that specialises in manufacturing antibodies for blood testing machines. Hospitals around the world use its products to help diagnose heart disease, thyroid problems, fertility issues, cancer, and a plethora of infectious diseases.

Unlike other antibody creation labs, Bioventix uses a proprietary sheep monoclonal antibody (SMA) technology that far out-performs the competition.

The business has two revenue streams.

The first is the manufacture and distribution of its SMAs to in vitro diagnostics (IVD) companies around the world – such as Roche Diagnostics, Siemens Healthineers, and Abbott Diagnostics.

Currently, the company sells around 10–20 grams of the purified antibodies each year. Needless to say, it’s an expensive material.

The second source of revenue is from royalties. Whenever a client sells a diagnostic product that uses SMAs to their downstream customers, Bioventix receives a modest royalty. As it stands, these agreements generate approximately 70% of the company’s annual revenue.

This unique approach to business results in an ongoing source of money from its clients, after the sale of the product.

It also partakes in contract antibody creation programmes. Other companies pay Bioventix to develop a new antibody for exclusive use. The process typically takes one year. Once completed, the firm once again continues to receive royalties from each sale.

The financials 

The latest results from June 2020 revealed continued revenue growth of 11%. At first glance, this appears to be a slow-down from previous years. However, Covid-19 did cause disruptions to the routine of the global IVD market that resulted in a 15%–20% reduction in activity.

A diverse portfolio of antibodies drives the royalty revenue. Although, it is worth noting that the royalty agreement for NT-proBNP, which currently represents 13% of annual revenue, is set to expire in July 2021.

There are plenty of other products generating royalties ready to replace it. However, the loss of income may have a notable impact on 2022 annual revenue.

One of the best shares to buy now?

The highly regulated pharmaceutical industry is both a blessing and a curse. Regulators have already approved the SMAs, but not the products of its clients. Seeking approval is a very lengthy process that can take up to a decade of tests and trials.

This delays the royalties Bioventix is set to receive from its contract antibody creation programmes. To put this into perspective, the projects being developed today likely won’t yield royalty revenue until 2025–2035.

On the plus side, the long and expensive path to approval grants a significant competitive advantage. The process creates a large barrier to entry for competitors as they would have to pursue regulatory approval themselves. 

In my opinion, this form of competitive edge is a rare to come by. Whether they are the best shares to buy now is a personal decision, but Bioventix is definitely on my list as a possible addition to my portfolio.

The post Looking for shares to buy now? 1 biotech stock I’d buy today appeared first on The Twelfth Magpie.

More reading

• Down 43% with a 9% dividend yield – should I buy this stock?

Zaven Boyrazian does not own shares in Bioventix. The Motley Fool UK has recommended Bioventix. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.