I’m always looking for fresh investment ideas. And while I’m keen not to follow the herd, I like to see what other Stocks & Shares ISA investors are buying (or selling) to find opportunities.
Trading platform interactive investor has just released its list of top 10 shares, funds and trusts that were bought by ISA investors in the week to 14 June. It contains several top-quality stocks that I’d be keen to add to my own portfolio when I next have cash to invest.
| Position | Stock | Weekly change |
|---|---|---|
| 1 | Legal & General Group (LSE:LGEN) | Up 6 |
| 2 | Nvidia Corp | Up 1 |
| 3 | Helium One | New entrant |
| 4 | Eurasia Mining | New entrant |
| 5 | Phoenix Group Holdings | Up 5 |
| 6 | National Grid | Down 5 |
| 7 | Rolls-Royce Holdings | Up 2 |
| 8 | BP | Down 6 |
| 9 | GameStop Corp | Down 3 |
| 10 | Vodafone Group | Down 5 |
As the table suggests, I think Legal & General could be the hottest of the bunch. Here’s why I think it could be a top stock to buy right now.
Great value
Legal & General’s place at the top of the table isn’t surprising to me. If I didn’t already hold a large stake in the FTSE 100 company I’d be buying it for my own portfolio today.
The financial services company has slumped on news that dividends will rise at a slower pace than usual between 2025 and 2027. Fresh capital-generation targets some have called ‘soft’ have also prompted many investors to exit or reduce their stakes.
Like interactive investor’s ISA customers, I consider this an excellent dip-buying opportunity. Today, Legal & General shares trade on a forward price-to-earnings (P/E) ratio of 9.5 times. They also now carry a huge 9.4% dividend yield.
A top FTSE buy
As a major provider of retirement and wealth products, the business has significant opportunities to grow earnings and dividends in the coming decades. The world’s population is rapidly ageing — the UN thinks the number of over-65s will rise to 1bn by 2030, and keep rising to hit 1.6bn in 2050 — providing financial services providers like this with a booming potential customer base.
There are many UK, US and European stocks I can buy to capitalise on this trend. But I like Legal & General specifically because of its cash-rich balance sheet.
The firm’s Solvency II capital ratio remains well north of 200%. And it is targeting cumulative Solvency II operational surplus generation of £5bn-£6bn in the three years to 2027. I believe it will have the balance sheet strength to invest heavily for growth while also continuing to pay market-beating dividends.
Tasty forecasts
City analysts believe group earnings will soar 225% year on year in 2024. They are also forecasting growth of 10% and 9% in 2025 and 2026 respectively.
Of course, broker forecasts cannot be guaranteed. Legal & General may print disappointing profits if interest rates fail to fall markedly. It also faces significant competition in each of its markets (including from Phoenix Group, which is also on that top 10 list of ISA buys above).
But on balance, I believe the Footsie firm has exceptional investment potential, in both the near-term and beyond.
