If I’d invested £10k in Rolls-Royce shares in an ISA six months ago, here’s what I’d have now

Rolls-Royce shares have been on a roller coaster ride, but the recent trajectory has been upwards. Where will they go next?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Silhouette of a bull standing on top of a landscape with the sun setting behind it

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Rolls-Royce (LSE: RR) shares have given investors a bumpy ride for years, crashing from 436p in January 2014 to just 98p at the start of 2023. That’s a staggering drop of 77.5%.

The FTSE 100‘s aircraft engine maker’s troubles began in February 2014 when years of steady growth came to an abrupt end with a shock profit warning. Four more warnings followed over the next 18 months.

One disaster after another

Rolls-Royce’s reputation was besmirched by revelations that executives had paid massive bribes to win export contracts, with the shady practice continuing right up to 2013. It was forced to hand over £671m to avoid prosecution by anti-corruption investigators in the UK, US and Brazil.

Should you invest £1,000 in Imperial Brands right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Imperial Brands made the list?

See the 6 stocks

Adding to its misery, its defence division was hit by government spending cuts, while its Trent 1000 engines, which go in Airbus 330 aircraft, suffered a string of technical problems.

Then Covid struck. The company generates most of its revenues from its aircraft engine maintenance contracts, which are based on miles flown. When airline fleets were grounded by pandemic restrictions, revenues plummeted.

I finally bought Rolls-Royce on 1 November last year, on the principle that things could only get better. And so they did, a lot faster than I expected. My holding is up 77.5%. The stock closed yesterday at 145.42p.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Somebody who bought Rolls-Royce exactly six months ago would be sitting on a 116% gain, turning £10,000 into a thumping £21,600. That’s purely from share price growth as there’s no dividend at the moment. It would be all tax-free if they had invested inside their ISA allowance.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Rolls-Royce shares have weathered recent FTSE 100 turbulence pretty well, rising 8.45% over the last month. So would I buy more today?

More turbulence ahead

In January, new CEO Tufan Erginbilgic shocked investors and staff by labelling his charge a “burning platform”, adding that “this is our last chance”.

JP Morgan had previously warned he might take this approach, but assumed it would damage the share price. Instead, Erginbilgic’s rough words gave it a boost. Now we wait to see if he can match them with action.

Today, analysts are a lot more bullish about Rolls-Royce shares. Citi recently lifted its price target to 255p, saying it could see “a clear route to much better cash flow”.

This included more than £1bn from non-systemic elements dropping out. S&P said the company’s debt might win back its investment grade rating over the next 12-18 months. 

Much still depends on Erginbilgic’s turnaround plan. A global recession is a concern, as this would probably hit flying hours and revenues. Another worry is that net company debt is still high, at $7.21bn, although that’s down from $10.49bn at the end of 2021.

I’m not banking my gains. Typically, I buy shares with a minimum 10-year view. I’m holding on for the happy day when the dividend resumes. After the recent surge, I won’t push my luck by increasing my stake today. It’s flown high in a short space of time.

No, I’m hunting through the FTSE 100 for other ISA bargains. And there are plenty around.

Should you invest £1,000 in Imperial Brands right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Imperial Brands made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Rolls-Royce Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Tree lined "tunnel" in the English countryside of West Sussex in autumn
Investing Articles

How should I invest to build retirement wealth in a SIPP for a child?

Ben McPoland explains how he plans to adapt his investing strategy in order to more reliably build wealth for his…

Read more »

Content white businesswoman being congratulated by colleagues at her retirement party
Investing Articles

Age 60 and looking for income? 3 FTSE 100 shares yielding 6%+ to consider

Harvey Jones picks out three FTSE 100 shares that offer a juicy passive income stream. Older investors should consider them,…

Read more »

UK money in a Jar on a background
Investing Articles

One of Britain’s best dividend shares is soaring! Time to buy?

Our writer's been looking for shares to buy. One of the biggest UK dividend payers has caught his eye. Could…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

£100, £1,000, or £100,000? Here’s how much it takes to start investing in shares!

Does it take a large sum of money for someone to start investing in the stock market? Our writer doesn't…

Read more »

Close-up of a woman holding modern polymer ten, twenty and fifty pound notes.
Investing Articles

£20,000 in an ISA? Here’s how it could target £1,250 a month in passive income

A Stocks and Shares ISA can be a platform for someone with spare cash to set up a sizeable second…

Read more »

Close-up as a woman counts out modern British banknotes.
Investing Articles

3 UK shares I own for easy passive income

Christopher Ruane runs through a diverse trio of UK shares he currently owns, each of which generates passive income in…

Read more »

UK coloured flags waving above large crowd on a stadium sport match.
Investing Articles

Is the UK-US trade deal a brilliant buying opportunity for FTSE 100 shares?

A long-awaited trade deal has been struck between the UK and the US, but how much will FTSE 100 stocks…

Read more »

UK supporters with flag
Investing Articles

3 growth stocks up 27% in a month to consider buying now

Stock market volatility has been a brilliant opportunity to buy growth stocks, which are now rebounding at speed. Harvey Jones…

Read more »