1st April 2015
As the end of the tax year nears, The Share Centre analyses the most popular stocks and funds currently held by investors in their Isas…
Most popular stocks currently held in an ISA:
1) British American Tobacco
3) National Grid
Helal Miah, investment research analyst at The Share Centre, says: “The top five stocks show us that from the core holdings of their ISA investors are seeking stability in the form of larger blue chip companies that offer a low to medium level of risk and predominantly with an income focus.
“We recommend British American Tobacco as a ‘hold’ as growth in emerging markets, product innovation and above-average income are all in its favour. However the steady decline in developed world volumes and investor’s possible move towards higher-growth sectors as the global economic backdrop improves may hinder progress in the short to medium term.”
“GlaxoSmithKline’s defensive nature and the competitive yields paid to investors make this a core holding for many portfolios. Future improvement should be helped by a pipeline of new drugs, diversification across consumer healthcare as well as biotechnology, and increasing exposure to emerging markets.
“National Grid is a regulated business with a prospective 2016 yield of around 5.3%, combined with management’s focus on improving the return on its US operations. We like this stock for income seekers and with political pressures hitting others in the sector, would not put such investors off buying into the shares, especially after the recent 10% decline in the share price.
“BP has a higher risk level to the first three stocks, and offers investors capital growth as well as income. Investors need to be aware of the impact of the current uncertainty over the oil price, however BP compares favourably to its peers and we recommend investors drip feed in to the stock.
“We recommend Prudential for investors looking for potential growth and income that spans a number of geographical regions – offering investors diversification. The Asian growth story is of particular interest. Although the company doesn’t pay a significant dividend, however this has been steadily growing over the years.
Most popular five funds currently held in an ISA:
1) CF Woodford Equity Income fund
2) Invesco Perpetual High Income fund
3) First State Asia Pacific Leaders fund
4) Invesco Perpetual Monthly Income Plus fund
5) Aberdeen Emerging Markets
Andy Parsons, head of investment research at The Share Centre, says: “We have two themes coming from the funds currently held in an ISA – income and higher risk markets.
“Investor appetite remains strong for the CF Woodford Equity Income fund which is approaching its first anniversary. Neil’s tried and trusted approach to investing provides investors with a combination of core dominant dividend payers and UK blue chips. This fund also offers an element of excitement through the fund’s appetite for small start-up companies.
“The Invesco Perpetual High Income fund remains a core holding for many investors seeking a steady income return. The fund is perceived as being defensive in nature so less susceptible to volatility, however this can potentially mean periods of underperformance. The fund manager is not afraid of being contrarian or to back convictions and beliefs.
“The First State Asia Pacific Leaders fund is an ideal way for investors to gain exposure to the potentially higher returns of Asia, however it is not for the fainthearted. Managed by Angus Tulloch and Richard Jones, the fund invests in companies with a strong franchise, high barriers to entry, predictable and sustainable earnings growth, financial strength, good corporate governance and that the managers believe are undervalued. Considerations to the broader economic environment and company meetings are also key to their decision making process.
“The Invesco Perpetual Monthly Income Plus fund invests 80% of its assets in debt instruments such as government bonds and corporate issues, with exposure to UK equities limited to 20%. Whilst predominantly a bond fund, the equity kicker ensures investors are likely to receive a slightly punchier overall total return.
“The inclusion of the Aberdeen Emerging Markets fund in our top held ISA funds is a reflection of investor popularity three to four years ago. The managers have a strong emphasis on finding value and quality companies.”