I recently asked ChatGPT: “Which bargain stock should I put in my ISA?” After congratulating me on asking a good question, it came up with a list of six very different UK companies.
I already own two of them – BP and JD Sports Fashion.
In business for 177 years
Of the other four, M&G (LSE:MNG) is the most familiar to me. Although it can trace its origins back to 1848, it only became a listed company in October 2019, having been de-merged from Prudential. Since then, it’s increased its dividend every year since.
And it’s a pretty generous payout too. Based on amounts paid over the past 12 months, the stock’s currently yielding 7.4%. This puts it in the top three of FTSE 100 members. And compared to last year, it’s increased its 2025 interim dividend by 1.5%.
However, due to the size of its investment portfolio, it remains vulnerable to continuing economic uncertainty. Not only would this affect the level of new business but it could potentially impact its solvency, its earnings and – ultimately – its dividend. At 30 June, it carried £66.2bn of equities, £64.5bn of debt securities and £14.2bn of investment properties on its balance sheet.
It also faces increased competition with a number of challenger brands looking to disrupt the industry.
Steady as she goes
But the group continues to grow modestly. During the quarter to September, its assets under management increased by £10.3bn to £364.9bn. This follows a small year-on-year increase in its half-year (30 June) operating profit.
And then there’s the dividend.
Although I think it has lots going for it, I already have exposure to the sector through Legal & General. However, others looking to take a position in the wealth management industry could consider the stock.
Also on the list…
Chat GPT’s other three ‘bargains’ are Centrica – it says it has a low price-to-earnings (P/E) ratio but a heavy requirement for capital expenditure; Hargreaves Services – “could be good for a dividend-focused ISA” – and 4imprint Group with its “strong cash flow” and relatively low P/E ratio.
I would have to do more research before considering them further as ChatGPT has based assessments on out of date information in the past. But I like the fact that the three are all operating in different sectors, which could help spread risk. In my opinion, having a diversified portfolio is a key consideration when it comes to investing. That’s why I don’t want to add M&G to my portfolio.
A word of caution
Of course, using a piece of software is no substitute for doing your own research. And the technology isn’t fallible. That’s why the creators of ChatGPT warn: “We do not warrant that the services will be… accurate or error free”.
I think it’s a bit of fun, but it’s no substitute for some more detailed analysis undertaken by a human being. To be honest, I don’t need a computer programme to tell me that there are plenty of bargain stocks around at the moment.
