As I get more acquainted with AI bot ChatGPT, I’m beginning to recognise just how powerful a tool it will become. Then again, it remains (very) questionable how useful it is for recommending which UK shares might be worth backing with a bob or two in 2025.
Allow me to explain why.
Some very familiar names
Having asked ChatGPT to identify the best opportunities going today, it came up with fives names. All were established businesses operating in different sectors. The latter was particularly pleasing since diversification remains the only free lunch when it comes to investing and I’d never be without it.
Of the five, BP is surely the most recognisable. Despite BP having underperformed the FTSE 100 in 2024, the bot was bullish about it, thanks to a bouncing oil price and share buybacks. Miner Anglo American was highlighted as well, no doubt as a result of the (failed) takeover bid from rival BHP. Perhaps the latter will make another offer in 2025?
Pest control firm Rentokil Initial and pharma giant GSK also cropped up.
Both of these companies have been struggling. The former recently revealed that synergies from the integration of a former rival would be hit by a two-to-three-month delay. The latter faced a nasty (but now settled) lawsuit relating to its heartburn treatment Zantac.
On a more positive note, these stocks now look cheap relative to their average valuations over the last five years.
Here’s where things get interesting
One stock selection that did take me completely by surprise, however, was travel hub caterer SSP Group (LSE: SSPG). Its shares having fallen by 66% in the last five years!
To be fair, a lot of this price destruction happened at the start of the first pandemic lockdown in March 2020. With airports and railway stations barely running, earnings (and sentiment) were always going to suffer.
So, why might SSP Group be a good pick now? ChatGPT identified booming demand for air travel and improving financial performance.
This doesn’t sound outlandish to me. Passenger numbers surpassed pre-pandemic levels in various regions last year. While understandably low for this kind of business, margins at the Upper Crust owner have also been improving.
On top of this, I’m inclined to say that the price-to-earnings (P/E) ratio of 14 for the current financial year isn’t excessive. There’s a 2.6% dividend yield as well.
Not so fast
The trouble is that a firm like SSP is exposed to multiple challenges. Geopolitical issues, industrial action, poor weather, increasing numbers of people working from home, and ever-present competition could all impact earnings going forward. The bot didn’t mention any of these. And I think they help to explain why SSP shares have barely recovered since.
More generally, I’m hesitant to automatically accept any of ChatGPT’s recommendations for the simple reason that my perception of ‘best’ may be completely different from other Fools. It depends massively on factors such as risk tolerance, financial goals, and investment horizon, to name a few.
One final moan relates to the size of the companies recommended. Most were from the FTSE 100 and arguably focused more on value for money rather than growth potential.
Does this mean that only the biggest UK businesses are worthy of attention? I definitely don’t think this is the case at all!
