As the U.K. emerges from the coronavirus pandemic with excess cash to spend, analysts name their favorite stocks to play the trend. Consumers across Britain accumulated significant savings during lockdowns, as social restrictions limited shopping, socializing and holidays. Now, experts expect spending to ramp up. "Consumer spending, fuelled by abnormally high levels of savings, should continue to power ahead," Dean Turner, economist at UBS, said in a note on Sept 27. "Add to this retailers restocking and manufacturers rebuilding inventories—all against a backdrop of loose monetary and fiscal policy—and it's not hard to imagine a picture of above-trend growth for the foreseeable future." Charles Hunt, head of research at British investment bank Peel Hunt, identified a number opportunities to cash in on this trend. "In the U.K. there are significant cash balances. This Christmas, people will be a lot more keen to buy products," he said, adding that companies with a strong online presence and delivery options are expected to gain as a result. Retailers Next , Dfs and Boohoo are three of his favorites. Hunt also noted an ongoing desire by U.K. shoppers to keep spending on their homes — a trend that began during the pandemic and is likely to continue as many workers continue working from home to some extent. He cited U.K. kitchen developer Howdens as a stock to watch. "A lot more people will want to go on holiday as well," Hunt said, mentioning low-cost airline Jet2 as a potential winner in the space. The travel sector has been one of the main beneficiaries of recent government announcements regarding looser travel rules. The U.S., for instance, announced last month that it would open to foreign travelers who have been fully vaccinated without the need for quarantine on arrival. 'Disarray amongst peers' Simon Young, portfolio manager at AXA Investment Managers, said the pandemic had given a number of British firms a unique opportunity. "Some companies have taken advantage of disarray amongst peers to increase their competitive positions," he said in a note on Sept.21. "We have taken the opportunity to establish holdings in great businesses that have been hit hard by the pandemic, but which we think will emerge fitter and even more competitive." Young's top stock picks are: bakery chain Greggs , food service company Compass Group , and Admiral Insurance , an insurance firm. These picks highlight a trend that many investors have identified as social restrictions are eased — notably, the reopening of the economy. UBS' Turner agreed that there is a potential for recovery in a number of stocks exposed to this reopening theme. "The 'reopening trade' has been hurt in recent months by concerns about the delta variant, but we expect a catch-up in the months ahead, as vaccination rates pick up, booster shots are rolled out, and mobility restrictions are removed more permanently," he added.
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As the U.K. emerges from the coronavirus pandemic with excess cash to spend, analysts name their favorite stocks to play the trend.