5 Last Minute Stock Picks by ISA Investors

Five last minute equity investing ideas that ISA investors have been buying through stockbroker Hargreaves Lansdown

Karen Kwok 5 April, 2016 | 8:39AM
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This article is part of our Guide to Maximising Your Pension, helping investors build up the maximum possible pension pot – and turn it into the maximum possible retirement income. 

Investors who have not utilised their ISA allowance better take action as soon possible: as the end of the tax year approaches, time is running out to use the 2015/16 tax year’s £15,240 allowance.

Under the shield of an ISA wrapper, most assets, subject to various annual allowances are tax free. This includes cash in special savings accounts, investment in stocks, bonds, open-end and closed-end funds. The ISA allowance can be divided into cash saving ISAs and investment ISAs, however only one of each can be opened in each tax year. Therefore, investors should take advantage of each year’s allowance to minimise tax on capital gains in any investment made.

Investors often leave their ISA investing decision to the last minute, and according to data provided by stockbroker Hargreaves Lansdown, last minute ISA stock investors are considering into commodity and banking stocks.

 Laith Khalaf, senior analyst at Hargreaves Lansdown said while oil and mining stocks have rebounded since the start of the year, the banking sector has struggled. However investors are expecting “some bounce-back-ability in resource and banking stocks” according to data in March.

Below are the five most popular stocks purchased by ISA investors in March through Hargreaves Lansdown, coupled with  what Morningstar analysts think about these stocks.

Glencore PLC (GLEN)

Glencore has been one of the gainers in the mining rally since the start of the year. The company’s shares have increased by 57% year to date. However the stock is rated as an overvalued stock by Morningstar analysts. Adverse movements in commodity prices represent the key source of risk for Glencore's industrial and marketing activities, Morningstar analyst David Wang said. Also the company’s mining portfolio is decidedly overweight higher-risk countries with relatively underdeveloped institutions and limited legal safeguards for foreign investors.

Although Glencore ranks among the most diversified of the global mega-miners, because China is the key demand driver for nearly everything Glencore digs out of the ground, diversification benefits are limited, Wang added.

Lloyds Banking Group (LLOY)

With noncore assets and government ownership now down to minimal levels, Lloyds is now one of the sturdiest banks in Europe, Morningstar analyst Erin Davis said. Lloyds’ 2015 dividend surprised to be the upside, and Morningstar analysts’ 2016 dividend projection implies a 5.8% plus forward yield. The stock is currently rated as an undervalued stock with a four-star rating by Morningstar analyst.

Barclays PLC (BARC)

Barclays spent much of 2015 at a crossroads but its path may soon be much clearer. The new chairman John McFarlane is clearly determined to improve profitability, Davis said. Barclays is consolidating and turning around its Africa operations, where concentrated market share in markets like South Africa have the potential to create high-return businesses.

Although concerns about Barclays' viability have eased, questions about write-downs and long-term profitability remain. In early March the bank reporter a 2% drop in underlying annual profits to £5.4 billion. The bank will pay a final dividend for 2015, bringing the full dividend for the year to 6.5p, the same as the year before. However, it warned investors that this will be reduced to just 3p per share for 2016 and 2017. The stock is rated as an undervalued stock by Morningstar analysts.

Royal Dutch Shell (RDSB)

Investor sentiment on Shell today remains negative after years of poor execution, Morningstar analyst Stephen Simko says. If new CEO Ben van Beurden can shake things up enough to where Shell operates in line with its peers, it could prove to be a material near-term share catalyst. Yet Europe is a terrible region for refining, and Shell is heavily exposed.

Management has been slow to restructure operations here, and this will thus remain a drag on returns, Simko adds. Also Shell's oil and gas production involves operating in politically unstable regions where leaders or members of its population can be hostile toward Western energy firms. The stock is currently rated as an overvalued stock by Morningstar analysts.

ITV PLC (ITV)

The television broadcasting company currently is not rated or commented on by Morningstar analysts. 

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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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Barclays PLC156.22 GBX1.92Rating
Glencore PLC502.40 GBX0.89Rating
ITV PLC72.50 GBX4.56
Lloyds Banking Group PLC43.90 GBX1.08Rating
Royal Dutch Shell PLC B  

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk