I asked ChatGPT to name 2 cheap shares to beat the FTSE in 2025. Its first pick astonished me

Harvey Jones used artificial intelligence to help him select two cheap shares from the FTSE 100 that should fire up his portfolio in the year ahead. This is what it said.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m on the hunt for cheap shares and happy to get help wherever I can, even if that means calling in the robots. So I asked AI chatbot ChatGPT for its views.

Of course, I know it doesn’t really have a view. It just culls information from the internet. Although in that respect it isn’t so different from the rest of us.

I didn’t see its first stock pick coming. I thought it would choose a couple of FTSE 100 companies whose shares had plunged in 2024 and were dirt cheap as a result. Instead, it came up with Barclays (LSE: BARC). It’s been one of the best performers of all, with the shares up 80% over the last year.

The shares aren’t as cheap as the bot thinks

This highlights a risk of relying on ChatGPT. It based its recommendation on Barclays’ price-to-earnings (P/E) ratio for 2023, which was a lowly 5.1. After the recent surge, it’s now up to 9.5. Investors beware.

However, that’s still comfortably below the FTSE 100 average P/E of around 15 times. And Barclays currently has a modest price-to-book ratio of just 0.5. That’s half the figure of 1 seen as fair value.

It also boasts a diversified revenue stream across retail and investment banking, which includes exposure to the thriving US market. “This provides some resilience against sector-specific downturns”, ChatGPT tells me. 

It’s actually quoting a Motley Fool article there. An old one. ChatGPT’s other ‘insights’ are just blether about the financial services sector being regulated and competitive. So what do I think?

Barclays is a brilliant long-term buy and hold. But after its strong run I don’t think this is the time to buy. The yield’s now down to 3%. I hold Lloyds Banking Group whose shares rose ‘just’ 20% last year. But with a P/E of 7.1 and forward yield of 6%, I think it’s the better pick. I’m only human though, and could be wrong.

ChatGPT’s second stock pick is cheap by anybody standards, oil giant BP (LSE:BP). So cheap in fact that I bought its shares on 14 January at a P/E of just 5.9 times.

I decided BP was an unmissable bargain

The BP share price has been highly volatile in recent years, mostly down to oil price movements. It rocketed after Vladimir Putin invaded Ukraine in 2022, triggering the energy shock, then fell as the West secured other supplies of energy.

Today, Brent crude’s back above $80 a barrel following the Biden administration’s 11th-hour sanctions on Russia, chilly temperatures across the Atlantic and inflation fears.

Markets are watching President-elect Donald Trump closely. He wants the US to get drilling, which should increase supply. Yet Goldman Sachs has warned strict sanctions on Iran could send Brent towards $90. Plus we’re all wondering what OPEC+ might do next.

I’m looking beyond the short-term noise – particularly voluble in the energy sector – and treating BP as a long-term stock to buy and forget. Now looks like a great entry point. Especially with that bumper 5.3% trailing yield and potential share buybacks.

ChatGPT also informs me that “BP must navigate the complexities of the energy sector’s transition and commodity market volatility”, and that’s a fair point. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Bp P.l.c. and Lloyds Banking Group Plc. The Motley Fool UK has recommended Barclays Plc and Lloyds Banking Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Time to buy Nvidia shares before fresh all-time highs?

Nvidia shares began 2025 at an all-time high before a big drop in the last week or two. Our writer…

Read more »

Investing Articles

A top FTSE 100 share to consider for a Stocks and Shares ISA starter portfolio!

While not without risk, a lump sum in this FTSE 100 trust could prove a great way for Stocks and…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

I asked ChatGPT to name the best 5 UK shares to build wealth over 50 – and here they are!

Harvey Jones is looking to build a balanced portfolio of UK shares to fund his final years, and asked ChatGPT…

Read more »

Investing Articles

£10k invested in Scottish Mortgage shares after the DeepSeek crash is now worth…

Harvey Jones thought his Scottish Mortgage shares were heading for a bumpy ride when DeepSeek emerged last month. Then he…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

1 ex-penny stock up nearly 400% in my Stocks and Shares ISA! 

This writer is starting to take notice of a small-cap stock that is 'up' significantly in his ISA portfolio over…

Read more »

Investing Articles

The FTSE 100 index hits new highs! But will Legal & General shares outperform it in 2025?

Legal & General's share price has rocketed almost 8% so far in 2025. Can it continue to outstrip the surging…

Read more »

Investing Articles

Up another 8% in a week! So what’s stopping me from buying IAG shares? 

Harvey Jones is desperate to add high-flying IAG shares to his portfolio before they climb even higher but there's a…

Read more »

Happy couple showing relief at news
Investing Articles

The Bank of England’s slashed its growth forecast but the FTSE 100 doesn’t seem to care!

On the day the UK’s central bank halved its forecast for growth in 2025, the FTSE 100 reached a record…

Read more »