I asked ChatGPT for the best FTSE stocks to buy at the end of January. Here’s what it came back with. I’ll be honest upfront: I’m rarely blown away by AI’s capacity to pick stocks. It’s often using outdated data and seriously lacks logic.
So, what did it say this time?
ChatGPT’s picks
Barclays was first up. Hardly exciting. The AI platform said that it still trades at a modest valuation and that the dividend is improving. However, I’d suggest it’s actually trading very close to fair value and institutional analysts appear to agree with me. It’s trading around 9.1 times forward earnings with a 1.9% dividend yield.
Despite this, as AI failed to recognise, it may have a good year ahead of it. That’s partially due to the prominence of its investment bank and the number of potential high-profile IPO expected in 2026. I think it’s worth considering for the long run, but I’ve actually just reduced my position after a 240% run up.
Next was NatWest. Another bank. ChatGPT said that NatWest looks cheap on most traditional measures, pays a decent dividend, and has a relatively straightforward business model. It added that there’s little romance here, but if credit quality holds up, the risks looks limited.
Once again, I don’t believe this is a bad pick, but I’m a little concerned that near-term positives might already be priced in. It’s not expensive at 8.9 times forward earnings and with a 5% dividend yield, but banks rarely become expensive because they’re cyclical.
The third pick was Marks & Spencer (LSE:MKS). It said that this is a turnaround story rather than a value trap. Food continues to perform well, clothing has stopped embarrassing itself, and management execution has improved. Expectations aren’t demanding, which helps.
I think the data it’s using is possibly a little outdated here. We know M&S is resonating with consumers but 2025 was disrupted by a cyberattack. It’s also inexpensive versus peers at 11.2 times forward earnings for the next 12 months — ChatGPT didn’t know this.
The best pick
Honestly, I didn’t expect to like any of ChatGPT’s pick, but I certainly think investors should be considering Marks & Spencer.
The stock currently represents a unique opportunity for investors, I feel. It has traded with lower price-to-earnings multiples, but when it did — 2022 being a good example — the prospects were for almost no earnings growth and net debt was more than half the market cap.
Today, that equation has changed. Net debt is £2.5bn versus a market cap of £7.3bn. And earnings growth for FY27 is projected at 46% — this reflects the fact that 2025 was a bad year due to the cyber attacks.
As such, we’re actually looking at a stock with a price-to-earnings-to-growth (PEG) ratio around 0.5.
Of course, there are risks to the thesis. If the economy goes into reverse, a premium (actually, I think it’s very fairly priced) grocery brand like M&S may see some weakness in demand.
Nonetheless, that’s a risk I’m willing to take. It’s been on my watchlist for a month or so now, and I expect to add it to my portfolio soon. This hasn’t been prompted by ChatGPT. The AI bot is interesting but I’m not made enough to spend my money based purely on what it says.
