Six cheap stocks set to thrive over the next 12 months

Sam Benstead
·6 min read
best cheap stocks buy now  -  Yui Mok/PA
best cheap stocks buy now - Yui Mok/PA

Over the next year, life in Britain will slowly return to normal, with shops opening, sporting events kicking off, and pent up spending unleashed.

It will not be a clean transition to normality but investors looking ahead at the sectors primed to thrive again, and even expand their market share, could be rewarded by picking the winners now before the crowd catches on.

Telegraph Money asked professional stock pickers which companies would perform best over a one-year period as lockdown goes from a gradual easing to being fully lifted. 

This is Part Two in a series looking at which stocks to own depending on your time horizon. Part One analysed stocks for the next six months and Part Three looked at stocks for three years. If you are new to investing, first take a look at our guide to buying stocks for the first time. 

Coats Group  

Lockdown has forced retail stores to close, and even when it gradually eases, footfall will be considerably lower than normal.

This means lower sales in the short term for Coats Group, one of world’s largest manufacturer and distributor of  raw materials used for clothing, like sewing thread for companies like Adidas and Under Armour.

However, there could be a sales boom when pent up demand is unleashed once lockdown is fully lifted, according to Charles Hall, of stock broker Peel Hunt.   

“Sales will be sharply lower in the short term as many of its customers have closed their stores. However, online sales are picking up and stores are starting to reopen,” he said.

He added that Coats will be in a stronger competitive position as clothing companies seek to reduce reliance on China in their supply chain.

"Over a year, it should gain more market share and benefit from a return to normal shopping patterns," he said.

The share price has fallen 27pc this year but has started to rebound from April lows. 


Similar to the decline in retail footfall, consumers are also avoiding opticians due to government restrictions and concerns around hygiene. This has affected the business of Inspecs, which makes and distributes glasses for the likes of Superdry and Saville Row.

It listed on the Alternative Investment Market (Aim) in February this year with a valuation of £140m but the stock fell 25pc as the lockdown was implemented. However, it has bounced back 38pc since the start of April and analysts expect it go even higher as life returns to normal. 

“The lockdown has affected sales in the short term, but the company is well positioned to accelerate as opticians return to normal. Inspecs is seeing increased interest from both the big optician chains as well as branded suppliers and is also starting to supply some NHS trusts with safety eyewear," said Mr Hall.

Inspecs is headquartered in Bath but supplies over 50,000 opticians in 84 countries. It is one of only a few "vertically integrated" eyewear companies able to manufacture, design and distribute glasses. 

Associated British Foods (Primark)

The best stocks to hold over the next year are the ones that could suffer in the short term but emerge from the pandemic in a stronger position than competitors.

Chris Beckett, of investment manager Quilter, said Associated British Foods, which is best known for its ownership of clothing retailer Primark, will be one company that will come out stronger from the lockdown and thrive again once it is fully lifted.

“In Primark, it owns the most successful British-listed clothing retailer. At the worst point, all of its 376 stores across 12 countries were shuttered but these are gradually reopening starting with Austria and the Netherlands in the last 10 days,” said Mr Beckett.

He noted that not all clothing retailers have such a strong parent company or operating model and some will therefore never reopen, which will leave Primark with less competition in the future. "Consumers will value its low prices more than ever," he said.

The share price is 20pc higher than its March low point this year after a 40pc drop from February levels. 

Compass Group

It is not surprising that global contract caterer Compass Group’s share price has fallen 35pc this year and barely bounced back from March lows. Sports events, universities and schools are still largely cancelled and they are not expected to be back to normal any time soon.

With Compass providing much of the manpower behind these operations, it has been badly hit by  the lockdown.

However, Amisha Chohan, of Quilter, expects the business to recover quickly when lockdown eases and life returns to normal over the coming year. 

“Operating in a fragmented market, with over 10pc market share, Compass is well positioned to capitalise from an increasing trend towards the outsourcing of catering services, a market worth more than £200bn,” she said.

It raised £2bn from investors this week to reduce debt and shore up its finances ahead of more challenging market conditions. This was the biggest cash raising by selling stock of any British company since Covid-19 struck.


The lockdown has clearly played into the hands of American technology giant Microsoft as adoption of its remote working solutions has sky-rocketed. But Stephen Yiu, of Blue Whale Capital, said the real pay off will come over the next year when this momentum translates directly into earnings.

"With its suite of software spanning Office365, Outlook and Teams, Microsoft not only retained its user base during Covid-19 but empowered it by helping retain productivity while working remotely," he said.

It saw two years’ worth of digital transformation in two months as companies embraced remote team work and cloud computing. This will continue even as lockdown eases, he argued.

"We are permanently resetting to a new norm where remote work and collaboration are no longer considered tech companies perks but rather integrated into lots of industries," he said.

Microsoft shares have risen 15pc this year and are up 35pc since their March lows. 

Flutter Entertainment 

Sporting events will slowly return to our stadiums and screens over the next year, even if they do not have live crowds. In Germany, the football Bundesliga is now being played in empty stadiums and the English premier league could return in similar way in June.

Further ahead, the postponed UEFA European Championship and Tokyo Olympic Games are now scheduled for summer 2021. 

Luke Newman, of investment manager Janus Henderson, said FTSE 100 group Flutter Entertainment is well placed to profit once sports – and sports betting – return around the world. It owns brands like Betfair and  Paddy Power and completed its acquisition of American company The Stars Group in May, which brought brands like Sky Bet and PokerStars into its operation.

"The combined entity will be the market leader in American sports betting and will benefit as professional sports return to action, even if behind closed doors for a prolonged period of time," said Mr Newman.

The stock has risen 16pc this year.