Generative artificial intelligence (AI) is already impressive today. It can bash out Shakespearian sonnets, write code, and summarise lengthy documents. I recently used it to translate a foreign menu into English, which it did in seconds. But can it identify market-beating UK stocks yet?
To find out, I put ChatGPT to the test, asking it to name the best three UK stocks for me to buy today and hold for the next five years. I instructed it to consider investment trusts too, if it deemed them worthy.
Let’s take a look at what it picked.
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The results
Taken together, ChatGPT said the following three investments offer diversification, income, growth, stability, and exposure to a “megatrend“. At first, I was a little surprised at the names it spat out.
- F&C Investment Trust — The chatbot said this trust offers diversified exposure to both developed and emerging markets, as well as boasting over 50 years of consecutive dividend growth
- Unilever — According to ChatGPT, Unilever is “low-risk” and can be the defensive cornerstone of my portfolio due to its global footprint and resilience to economic downturns
- The Renewables Infrastructure Group (LSE: TRIG) — The app’s final pick is aligned with the megatrend of combating climate change due to its focus on wind and solar power generation
My immediate thoughts
F&C Investment Trust certainly offers stability and diversification — it’s 156 years’ old and holds over 400 different stocks! These include Nvidia, Microsoft, Apple, Mastercard, and nearly every other large firm on the planet.
However, I fear its portfolio’s far too diluted with too many stocks. Over the past five years, F&C’s basically mirrored its global index benchmark. Not bad. But the best UK stock to buy till 2030? I disagree. ChatGPT failed to say F&C’s dividend yield‘s just 1.37%.
The Unilever pick wasn’t too much of a surprise, although it wouldn’t be in my top three choices. The consumer staples giant has faced sluggish growth and shareholder dissatisfaction in recent times. Its share price has gone nowhere for years. I see Unilever as a very uninspiring pick.
Finally, I own shares of Renewables Infrastructure Group for the dividend. But there’s growing pushback against green energy policies across Europe, while higher interest rates continue to present challenges for debt refinancing and new renewable projects.
It does offer an 8.44% dividend yield, but I’ve been keeping an eye on the dividend cover, which looks thin. This trust doesn’t seem set up for juicy dividend hikes across the next few years.
Again, I’m not convinced it’s among the very best UK stocks to buy. ChatGPT didn’t offer any analysis as to why it’s set for a big rebound (earnings growth, undervaluation, improving balance sheet, etc).
Fool vs AI bot
Stepping back, I’m not that impressed with this trio, considering that ChatGPT — powered by a gazillion Nvidia GPUs — had the whole of the London Stock Exchange to choose from. But perhaps it sees something I don’t. Maybe these stocks will handily beat the market.
What I’m going to do is track these shares each year to see how they get on. And I’ll compare them with my own like-for-like picks below:
- FTSE 100 fund — Scottish Mortgage Investment Trust
- FTSE 100 blue-chip — AstraZeneca
- FTSE 250 fund — BlackRock World Mining Trust
