The best shares for your ISA and SIPP portfolios
As the end of the tax year looms, investors are making the most of the SIPP and ISA tax free allowances. Here are five shares that investors might consider for their ISA or SIPP portfolios.
Global growth play
Compass Group, the food services business, offers an interesting dynamic for both earnings and income growth. Its catering operations around the globe mean it has commendable diversification, while a five-year earnings growth in excess of 10% per year signals that it continues to reap the benefits of outsourcing.
Dividends continue to grow too, but even with a yield of over 2% the firm is still only paying out around half its profit each year. This gives it more room to increase payouts, while also providing funds for further expansion. As the global economy improves, Compass looks well-placed to benefit.
Miners were one of the best investments anyone could make in 2016, but the question is now whether it still holds true in 2017. They are not for the faint-hearted, but Rio Tinto offers diversification in geographical and product terms, making it a better play than some others that focus on one country or one metal.
Earnings were up 12% last year, and cash flow has rebounded too, mainly thanks to the ongoing improvement in commodity prices. The dividend was boosted and the firm announced a buyback programme. Fundamentally miners look in better shape than they did in the easy years after 2008. Costs have been cut and ambitions trimmed, so as a play on higher commodity demand Rio Tinto has a lot to offer.
Standard Chartered has had a tough couple of years. The bank seemed to sail through the financial crisis in much better form than some of its peers, but it stumbled and took time to recover. Now however, it has posted an impressive surge in profits, which are expected to touch £3 billion in 2018. It has also found an unlikely ally in Brexit. While Barclays, RBS, Lloyds and HSBC will all have to deal with the event to a greater or lesser degree, Standard Chartered can afford to look on with a degree of detachment.
A potential return of dividends makes the shares even more interesting, and the focus on Asian markets offers the chance for higher rates of growth than its developed market peers.
Safe as houses?
It might seem odd to suggest a housebuilder, given worries about the UK economy and sky-high house prices, but with an impressive land bank and an innate ability to throw off cash, it makes sense to keep Persimmon in mind. Earnings are expected to keep rising in coming years, and while the government continues to make noises about a change in policy, no coherent developments appear to be in the offing.
A sudden tightening of UK lending could hurt the sector, but there are grounds for expecting the Bank of England (BoE) to move relatively slowly on this. Fundamentally, the sector is still plagued by under-supply and strong demand, so Persimmon has much to recommend.
Kraft’s recent bid for Unilever livened up what is not normally an exciting sector, but the focus is now on how the consumer staples giant can keep itself competitive in a difficult world. It looks likely that sale of some brands is on its way, but having returned around 9% a year over the past 20 years the firm is still doing all the right things.
Consumer spending is holding up well, and as expectations of higher US rates take a knock such income stalwarts like Unilever have regained some of their lustre. It might not set the world alight, but solid performance here makes Unilever difficult to ignore.