In April 2025, the Great British Isa will make its debut. However, waiting a year to support Britain through this additional £5,000 tax-free allowance may not be the best long-term strategy.
It is 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 discontent among UK-listed companies over their rock-bottom valuations.
Many feel deeply unappreciated by investors, which means buying their shares could be a bargain 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 stock may be at a record high. But in the United States its value would almost certainly be much higher.
James Henderson, manager of investment fund Law Debenture, says the lack of love for UK plc is disconcerting.
It says: The management teams of “UK companies have generally weathered Brexit, Covid and the cost of living crisis well”. Therefore, it makes no sense for these high-quality, market-leading companies to be trading at their deepest discount to the MSCI World Index in 25 years.’
If this prospect excites you, you can select from a large list of candidates that will allow you to fill gaps in existing Isa holdings or make your first foray into the UK. Ian Lance of investment fund Temple Bar sees Shell and BP as “the new kings of total return”, capable of rewarding shareholders with dividends and share buybacks. Meanwhile, Interactive Investor’s Richard Hunter picks Tesco. The UK’s number one supermarket announced this week a dramatic increase in its sales and profits.
My customers’ satisfaction with Tesco food and F&F fashion was one of the reasons I bought this stock in February, as I mentioned in this column.
Tesco is part of the group of 11 companies considered by brokerage UBS to be the British equivalent of US technology stocks Mag 7 (Magnificent Seven).
The others are Anglo American, BP, Beazley, Convatec, EasyJet, GSK, Imperial Brands, Intertek, Rolls-Royce and Whitbread. Unlike the Mag 7, Britain’s Magnificent 11s provide exposure to a wide range of sectors, including aerospace, mining and travel.
Kitchen designer and manufacturer Howdens is another FTSE 100 addition to the list. Alexandra Jackson, manager of the Rathbone UK Opportunities fund, said: “Howdens is an incredibly well-run company that has gained market share in a very difficult environment.”
His colleague 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 modeling company.
It says: ‘Each year the Nottingham company designs, manufactures and ships tens of millions of Space Marines, Orks and other fantasy-themed figures to enthusiasts around the world. “Its recent deal with Amazon to bring its Warhammer franchise to the big and small screen could have great potential.”
Meanwhile, Lance picks ITV and suggests that “for £3bn, Netflix could buy ITV.” The streaming giant, he says, “would acquire ITV Studios, one of the largest producers of unscripted films in the US and a top three producer 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 of the Temple Bar fund, which also owns Shell and BP.
As Jason Hollands of Bestinvest points out, the trust’s shares are at a 9.9 per cent discount to the net value of its assets, making this a great British opportunity.
Also at a 9.2 per cent discount is Fidelity Special Values, which focuses on mid-caps 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 ‘it’s an early bird’s help’. 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 7,900. It has already surpassed this figure, indicating that more enthusiasm could be on the way.
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