Late last year, I asked ChatGPT for the best stocks to buy for my portfolio for 2025. I was given five blue-chip Footsie shares in Shell, Diageo, Unilever, Tesco, and AstraZeneca – all decent companies, but not exactly original choices.
Recently, I decided to test the generative AI app’s skills again so I asked it to give me five UK stocks to buy in light of the current market sell-off.
ChatGPT’s five sell-off picks
The generative AI app’s top picks for the current market pullback were:
- Barclays
- Vodafone
- Marks and Spencer (LSE: MKS)
- Rolls-Royce Holdings
- Legal & General Group
It informed me that these selections span various sectors, offering diversification and potential resilience amid market volatility.
My initial thoughts
Now upon receiving these picks, two things jumped out at me. One was that ChatGPT still doesn’t do any real stock analysis. Ultimately, it just scrapes ideas from websites (some of which are a little questionable).
This isn’t ideal. It didn’t seem to have any idea of the risks associated with an economic downturn/recession and how that could impact certain stocks.
The other issue was that pretty much all of the information was out of date. For example, it told me that Barclays shares have a dividend yield of 4.5%. Today however, the yield on offer from the shares is about 3.2%. Again, this isn’t ideal. If people were using the app to make investment decisions (I’m sure some people are), they’d be making decisions based on wrong information.
Average choices?
Going back to the five stocks, I don’t think it’s a great list, if I’m honest. Buying a bank stock like Barclays before a recession could backfire. That’s because banks are economically sensitive.
Investing in an insurer like Legal & General right now could also backfire. When there’s financial market turbulence, these stocks often take a hit.
Vodafone’s not a stock I’m interested in buying. It has minimal growth and a lot of debt – not a great combination.
As for Rolls-Royce, I like what the company’s doing but the stock’s expensive. Currently, the price-to-earnings (P/E) ratio is about 29, which is high.
One stock I do like
One stock on the list I like the look of, however, is Marks and Spencer. And I’m clearly not the only one who sees appeal here – while the market has sold off, the shares have been moving higher (they recently hit their highest level since 2016).
I’ve been doing a lot of shopping at Marks recently (both for food and clothes) and been thoroughly impressed with the offer. What really impresses me is their online clothing – there’s great value here, in my view.
Would the company be able to hold up in a recession? Well, there are no guarantees. But it does have a more affluent customer base than other UK supermarkets. So that could help. In terms of the valuation, the P/E ratio here is about 13. That seems reasonable. The dividend yield is about 2%. So there’s a little bit of income on offer.
Overall, I see quite a bit of appeal in this stock. I’m not sure it’s the best fit for my own portfolio (which is more focused on long-term growth themes and the companies that will benefit), but I think it’s worth considering today.
