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The end of the tax year is still four months away but I’m already wondering how to round off my Stocks and Shares ISA. I’d never let artificial intelligence pick my shares, and ChatGPT admits itself that this isn’t what it’s for. Still, I sometimes find it useful for early-stage research, so I asked it to highlight five stocks I could consider buying, splitting £2,000 into each.
To keep things realistic I told it what I already hold, because diversification is key. My ISA includes Legal & General Group, M&G, Lloyds Banking Group, GSK, Taylor Wimpey, Diageo, Glencore, 3i Group, Bunzl and Burberry.
Diversification is key
ChatGPT said this left me heavy on financials, consumer staples, mining and housebuilders, so it would focus on areas where I’m underweight, what it calls “tech-adjacent industries, energy transition, healthcare services, defence and infrastructure”. It’s good at the broad-brush stuff like that. Where it falls down is in assessing risk and reward, or providing accurate, up-to-date data. Yields and valuations are often months out of date, but presented as fresh. That’s why I treat AI as just a starting point.
Its first idea was National Grid, a portfolio staple for cautious ISA investors. ChatGPT praised its “predictable revenue, dependable dividends and lower volatility”, while warning about debt and political scrutiny. Personally, I’m worried the utility’s borrowing could spiral as it ploughs tens of billions into preparing the grid for renewables. Not for me.
FTSE 100 surprises
Its next pick was defence contractor BAE Systems The shares have soared but I’m wary after such a strong run, especially if the hoped-for peace in Ukraine edges closer. Then it suggested AstraZeneca, even though I already hold GSK. A great company, but I’m not doubling up.
After three obvious FTSE 100 names, things got more interesting. It recommended Segro. This logistics-and-data-centre real estate investment trust (REIT), which offers tax advantages.
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As a warehouse specialist, ChatGPT said Segro should benefit from e-commerce growth but warned rental yields could be squeezed if vacancies rise. It didn’t mention that the shares have slumped 10% in a year and 25% over five. Yet the 4.25% yield and recovery potential merits further exploration, as does the final pick.
Worryingly, ChatGPT gets the name wrong, calling it Spirax-Sarco Engineering, when it rebranded as Spirax Group (LSE: SPX) back in May 2024. That’s 18 months ago, which makes me wonder how old some of its other information is.
Spirax is a specialist in thermal energy and steam management system. ChatGPT highlights its “long record of pricing power and niche market leadership”, but warns about its sensitivity to global manufacturing cycles. Those risks have outweighed the rewards lately, with the shares down 2% over one year and 37% over five.
I like buying quality companies when they’re out of favour. Spirax gives me access to two long-term themes in energy efficiency and industrial decarbonisation. I’m wary though, as global industrial output slows, although Spirax says its margins and revenues grew nicely in Q3. It isn’t exactly a bargain though, with a punchy price-to-earnings ratio of 23.7.
I still think it’s worth considering, but will do my own research first. Setting up a Stocks and Shares ISA is a personal business, where human intelligence easily trumps the artificial. It always will.
