GSK. AZN. or BP?

fimonkey

Hi All,

Yup I am a novice and I am doing my own research - just wanted your opinion on what to add to my small portfolio next (purchase date 17th Oct).

I already have Centrica, Vodafone, Tesco and Aviva.

At the moment I am looking for low p/e's with decent dividends, and I am only 'investing' £150 at a time in these companies.

This is about teaching myself how the markets and companies work etc. I already have a HSBC all shares tracker which has GSK (glaxo) so wondered whether to include AZN (astrozeneca) instead, because AZN also had net cash on its books in July.

I also like the fact that BP. have taken a battering recently so price seems low and I believe that long term energy will be crucial (though not if its based in the UK with the Government changing the goalposts). - I don't know much else about them (yet) and I already own Centrica however (what a dog they have been).

So - your first opinion is probably along the lins of I have no idea what I'm talking about - and you're right! = but what's your second opinion on which ones to add to my portfolio next? I am using ii's sharebuilder service so only £1.50 a trade.

Thanks in advance

westy22

There is sense in holding both GSK and AZN as, although they are both major pharmas, they sell totally different products. Both have huge potential markets in undeveloped countries and both should do well in the long term. Both have downsides concerning the expiration of product licences but, personally, I think that factor has been overplayed and is already fully reflected in their current prices.

As for BP, they have had a rough 2 years and there is still little light at the end of the tunnel. I am avoiding them until I see how things play out as I think their growth, when it comes, will be very modest. Please DYOR.

IronWolf

I've researched GSK and AZN thoroughly, BP not so much so can't really comment on them.

I hold GSK but declined AZN. To be honest at the current prices I dont think GSK is such a great buy, I got in at £11.60, I am looking to get out if it goes up to £15 or so, but depends what sort of returns you are looking for, I'm looking for quite impressive ones.

I went for GSK due to their diverse revenues and steady dividends, overall a pretty predictable company which I always like.

AZN on the other hand has had trouble with its pipeline, forcing it to buy out another pharma company for its research, and its revenues are dominated by a few blockbuster drugs. In a few years they will need something to replace them as the patents expire.

Now I'm not saying their revenues will decline, but I couldn't be confident in predicting what their income would look like over the next 10 years so I decided not to invest. At the current prices though a decline in earnings seems price in so maybe worth a punt if you're a gambling man.

wriggly

fimonkey wrote: »

I already have a HSBC all shares tracker which has GSK (glaxo) so wondered whether to include AZN (astrozeneca) instead

You do realise the HSBC All-Shares tracker actually contains more than the Top 10 shares, don't you? It includes both GSK and AZN (and BP), so you need to re-think your logic here.

My advice: forget thinking you know more than the market and buy more of the tracker.

Linton

All three companies you mention are large, solid, world class companies and traditionally good dividend payers, although BP has had a gap following the US problems. At the moment IMHO shares are cheap and you are unlikely to go wrong chosing any of them.

But you do have a point questioning the overlap with your all shares tracker. The tracker will include all the shares you mention including the ones you already hold as they are major constituents of the FTSE100. And the FTSE All share is something like 80% dominated by FTSE100 companies.

However at your very early stage in putting together a portfolio and the relatively small amount of money you are using I would suggest that gaining the experience of chosing, buying and monitoring shares is more important than the specific share.

BLB53

I already have Centrica, Vodafone, Tesco and Aviva.

Well done so far.

I would carry on building your portfolio with more blue chip shares which can grow their dividends over the long term. Also, if you don't need the income, reinvest these dividends to supercharge your portfolio. (I assume you are investing within an ISA?)

I hold Shell, rather than BP and hold AZN rather than GSK but there is probably not a lot between them.

Others to consider are Unilever, SSE, IMI, BSkyB, BHP Billiton. Also you could consider an investment trust like City of London which will hold many of the top shares and pays a dividend of around 5%.

Focus on the yield rather than prices and you won't go far wrong.

Good luck!

fimonkey

wriggly wrote: »

My advice: forget thinking you know more than the market and buy more of the tracker.

Yes I realise, .. sorry I was talking only about the top 10 holdings.

I know nothing about the market but I want to learn about individual companies, how the stock market works, p/e, NAV, dividends etc etc etc and buying a tracker won't help me do that.

I'm pretty much prepared to loose everything I put into shares at the moment whilst I am an learning. If I don't then bonus!!

fimonkey

Linton wrote: »

However at your very early stage in putting together a portfolio and the relatively small amount of money you are using I would suggest that gaining the experience of chosing, buying and monitoring shares is more important than the specific share.

Bingo .. that's exactly my plan but I am kind of pretending to myself that I am investing more hence wondering about particular shares as well as gaining the experience.

Oh and unfortunately the shares I am buying are NOT in an ISA!! The reason is I have my HSBC all shares tracker in the ISA with H&L to keep down charges etc, but my shares are bought through ii with the portfolio builder (£1.50 a trade). As I'm only investing £150 a time in the shares it was too much to pay the fee for dealing with H&L to put them in the ISA. Also I am not automatically reinvesting dividends as ii charge extra for that. Instead I am holding them on account and then will reinvest them myself when the balance is reasonable.

One day I will investigate 'bed and ISA' with the shares if I ever become good at this game, but with such small amounts I am a long long long way off having to pay capital gains tax etc.

Comments on the above welcome.

westy22

Also I am not automatically reinvesting dividends as ii charge extra for that.

You may want to re-examine that as iii charge only pennies per transaction for reinvesting dividends automatically. I recently was charged about 50p for SDLT and dealing charges for reinvesting a £60 dividend.

fimonkey

Thanks westy I will look into that and post my info here,.... but then dividends on only £150 worth of holdings - not likely to be that much is it? (5% divi for instance on £150 is £7.50. That might buy me less than 1/10th of a share in some cases). so because of that I figured it'd be better to hold my divis on account until they accumulated then invest them myself. ... As I said I'm a complete novice - have I got this idea completely wrong?

westy22

No, you're not wrong. You can do it either way and there will probably be only pennies to choose between the two different methods. You might, however, have to wait 12 months to build up say £150 and that cash will have been earning nothing. If you had drip-fed the dividends back into shares as you went along then you should have benefited from compounding and your shares may also have risen in value over the period (of course, they could also have fallen!).