The Great British Isa will make its debut in April 2025. Yet waiting a year to support Britain with this extra £5,000 tax-free allowance may not be the best long-term strategy.
It is becoming increasingly tempting to use some of this year’s standard £20,000 Isa allowance to set up your own version of the Great British Isa, given the dissatisfaction among UK listed companies at their rock-bottom valuations.
Many feel deeply undervalued by investors – meaning their shares could be a bargain to buy here and now.
Take the example of Shell, Britain’s largest company, which has hinted that it could flee London for New York. The oil giant’s shares may be at an all-time high. But in the US its value would almost certainly be much greater.
James Henderson, manager of investment trust Law Debenture, says the lack of love for UK plc is baffling.
He says: ‘British company management teams have generally weathered Brexit, Covid and the cost of living well. It therefore makes no sense that these high-quality, market-leading companies are trading at the largest discount to the MSCI World index in the last 25 years.”
If you’re excited about the prospect, you can choose from a large list of candidates, helping you fill gaps in existing Isa holdings, or make your first foray into Britain.
Ian Lance, of Temple Bar Investment Trust, sees Shell and BP as ‘the new Total Return Kings’, able to reward shareholders with dividends and share buybacks. Meanwhile, Richard Hunter, of Interactive Investor, opts for Tesco. Britain’s number one supermarket announced rising sales and profits this week.
Popular: Tesco is among the group of 11 companies considered by brokers UBS to be the British equivalent of the US Mag 7 technology shares
My own customer satisfaction with Tesco food and F&F fashion was one of the reasons why I bought these shares in February, as I mentioned in this column.
Tesco is one of eleven companies considered by broker UBS to be the British equivalent of the US Mag 7 (Magnificent Seven) technology shares.
The others are Anglo American, BP, Beazley, Convatec, EasyJet, GSK, Imperial Brands, Intertek, Rolls-Royce and Whitbread. Unlike the Mag 7, the UK Magnificent 11 offers 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, said: ‘Howdens is an incredibly well-run company that has taken market share in a very difficult environment.’
Fellow manager Alan Dobbie, who runs the Rathbone Income fund, proposes a foray into the creative industries in which Britain is a world leader, with a focus on Games Workshop, the fantasy model company.
He says: ‘Every year the Nottingham-based company designs, produces and ships tens of millions of Space Marines, Orcs and other fantasy-themed figures to enthusiasts around the world. The recent deal with Amazon to bring its Warhammer franchise to the big and small screen could have great potential.”
Lance, meanwhile, opts for ITV, suggesting that ‘Netflix could buy ITV for £3 billion’. 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, Britain’s largest commercial broadcaster, would also be part of the deal.’
ITV is one of the investments in the Temple Bar Trust, which also owns Shell and BP.
As Bestinvest’s Jason Hollands notes, the trust’s shares are at a 9.9 percent discount to the net value of its assets, making this a big UK opportunity.
Also at a 9.2 percent discount is Fidelity Special Values which focuses on mid-cap companies but also has stakes in Aviva and GSK. Other fund options include 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 cliché, but in 2024 it could be more relevant than ever.
In January, Goldman Sachs predicted that the FTSE 100 could end the year at 7900. This has already been surpassed, indicating that more excitement could be on the way.
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