Top Stock Picks for Your ISA

Killik's Rachel Winter looks at three buy and hold stocks that are expected to outperform over the next decade

Morningstar 12 March, 2019 | 11:01AM

 

 

Rachel Winter: ISAs protect against capital gains tax and income tax, so when you’re considering which of your stocks to hold in your ISA it makes sense to select ones that either have a very high yield or a potential to generate a large profit. I’m going to talk about three buy and hold stocks which we expect to outperform over the next decade.

The first is Xylem (XYL), which is a leading water technology company, producing filters and pumps, and also tools for analysing water supplies. The world has an expanding population and a finite supply of water, and so we have an increasing need for technologies that can help us make the most of what we have. In the West there is a need to reduce wastage from leaking water pipes, with the US losing over 13% of its water supply and the UK almost a quarter.  In emerging markets there is an ongoing need to clean up water supplies. Xylem is a company that can help to solve these problems.

The next stock is Tencent (00700), which is listed in Hong Kong and is one of our preferred Chinese companies. The Chinese stock market fell over 30% last year due to fears of the trade war between the US and China, and Tencent came down with it. This year there appears to be some progress in the negotiations between the US and China, and Chinese stocks are recovering. This is arguably a good time to buy into China’s leading internet company. Tencent is a major player in online payments, it’s the biggest gaming company in the world, and its messaging platform has over 1 billion users. The Chinese economy continues to grow at over 6% per year and Tencent is a company that is benefitting.

The final stock is Abbott Laboratories (ABT), which in our view is exposed to some of the most attractive areas of the healthcare sector: diagnostics, nutrition, and medical devices. The healthcare sector is increasingly focusing on prevention rather than cure. If a doctor can diagnose an issue early and help a patient to manage it with the right nutrition and perhaps a monitoring device, that patient is less likely to need lots of expensive drugs and less likely to end up in hospital which is incredibly expensive. Diabetes is a great example – if a patient has a device that helps them to monitor their own insulin they’ll be much better able to manage their condition. We believe this is the direction healthcare is moving in and Abbott is very well placed.

 

How can savers and investors make the most of their ISA allowance? Read our special report to find out. 

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.

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