With a new tax year approaching, many UK investors may be considering which stocks to buy for their ISA in 2026. I decided to see if ChatGPT has improved its stock-picking skills, or if it’s still just regurgitating old news.
As usual, the response was somewhat tepid but not terrible.
It suggested five picks that were relatively well diversified: RELX, Experian, National Grid, NatWest Group and Rolls-Royce (LSE: RR.).
RELX and Experian make sense right now because they’re selling at very low valuations. Over the long term, the recovery could be very rewarding. The mix of NatWest and National Grid are also decent, considering their growth and income characteristics.
However, I disagree with Rolls-Royce.
Despite a brilliant recovery story and compelling numbers, at today’s price I wouldn’t pick it as a core 10–20-year ISA holding. Here’s why.
An incredible recovery
Rolls-Royce has gone from struggler to stock market superstar, with the share price up over 1,000% in five years. Revenue is still growing nicely too, up about 12% year on year, which shows the turnaround is being backed up by real sales rather than just hype.
Under the bonnet, profits have improved sharply. In 2025, Rolls-Royce made around £3.5bn of underlying operating profit, up from £2.5bn the year before, and pushed its net margin to roughly 27%.
Civil aerospace, defence and power systems all saw stronger margins as the business focused on higher-profit work like servicing big jet engines and supplying power for data centres.
What the numbers say
Some of the figures look almost unreal. Return on equity (ROE) is about 643%, which tells you the company is squeezing a huge amount of profit out of a relatively small equity base.
On the income side, the dividend has finally come back, but it’s too small for relevance. The yield is about 0.7%, which is tiny if you want your ISA to pay you a steady, growing income. For comparison, plenty of solid UK utilities and banks are offering several times that level of yield right now.
Valuation is where I really start to frown. The forward price-to-earnings (P/E) ratio is around 36. That may be normal for speculative US tech, but not for a cyclical engineering firm.
The problems I see
Rolls-Royce is tied to areas like long‑haul air travel, defence budgets and big infrastructure spending. Those markets are strong today, but can turn quickly if governments cut back, airlines delay orders, or global growth stumbles.
Because the share price has already shot up and expectations are sky‑high, any disappointment on profits, cash flow or new contracts could hit the shares hard.
With a rich valuation, modest dividend and some leverage still on the balance sheet, there’s not a huge safety cushion if things go wrong.
The bottom line
For a bit of short‑term or higher‑risk money, Rolls-Royce is still worth considering — if the good news keeps coming.
But for a fresh Stocks and Shares ISA that I want to hold for up to a couple of decades, I’d rather focus on steadier compounders like RELX and stable income stocks like National Grid.
That leaves Rolls-Royce off my long‑term buy list for now. But there are many other promising growth stocks to consider this year…
