In April 2025, the Great British Isa will make its debut. Yet waiting a year to back Britain through this extra £5,000 tax-free allowance may not be the best long-term strategy.
It is becoming more and more tempting to use a chunk of this year’s standard £20,000 Isa allowance to establish your own version of the Great British Isa, given the unhappiness among UK-listed companies over their rock-bottom valuations.
Many feel deeply unappreciated by investors – which means that their shares could be a bargain to buy right here, right now.
Take the example of Shell, Britain’s biggest company, which has intimated that it may flee London for New York. The oil giant’s shares may be at a record high. But in the US its value would be almost certainly far greater.
James Henderson, manager of the Law Debenture investment trust, argues that the lack of love for UK plc is bewildering.
He says: ‘UK companies’ management teams have generally weathered Brexit, Covid and the cost-of-living crisis well. It does not make sense, therefore, for these high-quality, market-leading companies to trade at their largest discount to the MSCI World index over 25 years.’
If you are enthused by this prospect, you can select from a large list of candidates which should enable you to fill gaps in existing Isa holdings, or make your first foray into the UK. Ian Lance, of Temple Bar investment trust, considers Shell and BP to be ‘the New Total Return Kings’ – able to reward shareholders with dividends and share buybacks. Meanwhile, Richard Hunter, of Interactive Investor, selects Tesco. The UK’s number one supermarket this week announced rocketing sales and profits.
My own customer satisfaction with Tesco food and F&F fashion was one reason why I bought these shares in February, as I mentioned in this column.
Tesco is one of the group of 11 companies considered by brokers UBS to be the British equivalent of the US Mag 7 (Magnificent Seven) tech stocks.
The others are Anglo American, BP, Beazley, Convatec, EasyJet, GSK, Imperial Brands, Intertek, Rolls-Royce and Whitbread. Unlike the Mag 7, Britain’s Magnificent 11 provide exposure to a wide range of sectors including aerospace, mining and travel.
Howdens, the kitchen designer and manufacturer, is another FTSE 100 member to add to the list. Alexandra Jackson, manager of the Rathbone UK Opportunities fund, says: ‘Howdens is an incredibly well-managed business that has taken market share in a very tough environment.’
Fellow manager Alan Dobbie, who runs the Rathbone Income fund, suggests a foray into the creative industries in which Britain is a world leader, highlighting Games Workshop, the fantasy models company.
He says: ‘Every year, the Nottingham company designs, manufactures and ships tens of millions of Space Marines, Orks and other fantasy-themed figurines to enthusiasts all over the world. Its recent deal with Amazon to bring its Warhammer franchise to the big and small screen could have great potential.’
Lance, meanwhile, picks ITV, suggesting that ‘for £3billion, Netflix could buy ITV’. The streaming giant, he says, ‘would acquire ITV Studios, one of the largest unscripted producers in the US and one of the top three producers in all of its markets. ITV Media and Entertainment, the UK’s largest commercial broadcaster, would also be part of the deal’.
ITV is one of the investments at the Temple Bar trust which also owns Shell and BP.
As Jason Hollands, of Bestinvest, points out, the shares of the trust are at a 9.9 per cent discount to the net value of its assets, making this a Great British opportunity.
Also at a discount of 9.2 per cent is Fidelity Special Values which focuses on mid-cap firms, but also has stakes in Aviva and GSK. Other fund options are Artemis UK Select, Liontrust UK Growth and WS Evenlode Income.
Isa investors are routinely advised to use their allowance at the start of the tax year, on the basis that ‘the early bird catches the worm’. This may be a cliche, but in 2024 it could be more relevant than ever.
In January, Goldman Sachs predicted the FTSE 100 could end the year at 7900. It has already surpassed this, indicating more excitement could be on the way.
This post first appeared on Dailymail.co.uk
