Hobson: My ISA Stock Picks

THE WEEK: Morningstar columnist Rodney Hobson considers where to invest the remaining £5,000 of this year's ISA allowance

Rodney Hobson 23 February, 2018 | 2:25PM

Tax deadline approaches ISA season stock picking

We are fast reaching the time of year when people suddenly realise they haven’t used up all, or possibly any, of this financial year’s £20,000 ISA allowance and they rush to spend it unwisely before the 5 April cut-off.

As I still had £5,000 outstanding – at least I have used three-quarters of the allowance spread throughout the past 10 months – I have been looking for opportunities but resisting the urge to invest just for the sake of it.

Opportunity knocked twice this week in a before and after scenario, so I topped up two existing shareholdings to the tune of £2,000 each.

I always check Monday’s paper to see what results are expected each week and noted that major banks would be putting out 2017 calendar year figures. I remain baffled that Lloyds Banking (LLOY) shares have stuck persistently below 70p and, believing that figures on Wednesday would be on the better side of satisfactory, got in before they came out.

I’ve thought of buying more Lloyds shares on several occasions over the past few months but was put off by the fact that it was already my largest shareholding by value. However, the bank will be paying increased dividends which must register in the share price sooner or later.

I note that after the results, which showed profits up 24% and the dividend up 20%, Beaufort Securities advised its client to buy with a target price of 80p. The shares have struggled to get above 70p since the last of the government’s bailout stake was sold last year, but I believe they are a clear buy below that level. They edged towards closer to the ceiling after the results, giving me a small instant profit. There is more to come.

In the case of HSBC (HSBA), things didn’t go quite so well. I waited until after the results, which showed profits up but not by quite as much as analysts had hoped. I felt the 4% drop in the share price was a serious over-reaction, so I moved in hoping to catch the bottom. Alas, HSBC gave up another 2% the following day.

I’m quite laid back about it. I bought WH Smith (SMWH), Whitbread (WTB) and RPC Group (RPC) after each produced decent results that prompted an undeserved fall in their respective share prices. In each case the shares slipped lower, but I am now in profit. For long term investors like me, patience is a virtue.

Patience is Rewarded

The director of Walbrook Public Relations is another patient man. He has been persistently sending me updates on Tristel (TSTL), a maker of chemicals that prevent the spread of disease and contamination, for some time but I have never felt the urge to comment in this column. Until now.

In the six months to 31 December, Tristel increased revenue by 10%, with half of sales now being made overseas. The company has taken control of distribution in Hong Kong instead of using an agent, and genuine hopes have emerged of breaking into the North American hospital market within the next 12 months. Increased margins pushed profits up 18% and the interim dividend rises from 1.2p to 1.4p. The cash pile is raised from £3.9 million to £4.9 million, so the company will not be burdened by debt as interest rates rise.

The shares had a good run last summer, peaking at 318p, but have come off the boil. However, they seem to have found a floor around 230-240p and I don’t think that will be tested again. I like to mention companies that are too small for attract me as a shareholder, but which are worth a look for those who like to spot the next growth story on AIM. This could be it.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
HSBC Holdings PLC662.20 GBX1.78
Lloyds Banking Group PLC60.53 GBX1.73
RPC Group PLC812.40 GBX-0.76-
Tristel PLC287.00 GBX1.59-
WH Smith PLC2,110.00 GBX-0.09-
Whitbread PLC4,700.00 GBX-0.44-
About Author Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.