Today is the last day for investors to use their ISA contribution limit for the tax year that’s just ending. Tomorrow, a new financial year brings a new £20,000 limit.
I’ve used my full allowance for this year. But if I hadn’t, here’s where I’d be looking for some last-minute shares to buy.
Real Estate
Rising interest rates in the UK and the US have been driving down property prices. More expensive debt has meant that funding to buy buildings has been harder to come by.
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As a result, demand in the property sector has decreased, causing prices to fall. And a number of tax-efficient Real Estate Investment Trusts (REITs) have seen their share prices fall significantly.
Two in particular stand out to me as stocks to buy on the last day before the new ISA allowance. In the UK, Warehouse REIT looks attractive to me and Realty Income in the US is on my radar.
As its name suggests, Warehouse REIT focuses on industrial distribution centres. The risk here is that vacancy rates are rising as companies that began renting space during the pandemic start to struggle.
I expect this stock to do well, though. There are some natural advantages for warehouse owners in that the buildings are expensive to put up, location matters, and space in prime locations is limited.
Realty Income is a retail-focused REIT. It basically has the opposite characteristics of Warehouse REIT – it has strong tenants that are unlikely to go under, but its buildings are largely a commodity.
That means that the risks and rewards are exactly the opposite way around to what they are for Warehouse REIT. The business lacks pricing power, but it’s unlikely to have to deal with unpaid rent.
Both stocks have a dividend yield of just over 5% and I’d be happy buying either at today’s prices. Warehouse REIT probably offers better growth, but Realty Income is more stable.
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.
Banks
The other obvious sector to look at right now is financials. There’s a lot of pessimism around the banking sector at the moment and that makes shares in banks interesting to me.
NatWest Group is the stock that stands out to me in the UK. It has one of the highest shares of retail deposits, as well as a significant base among younger savers with its product range and offerings.
The risk with the company is that it’s still mostly owned by the UK government. That has the potential to limit its ability to operate independently as a profit-seeking entity if needed.
Nonetheless, were I looking for a stock to buy I’d consider NatWest. The company does far more in the way of share repurchases than other UK banks, giving it a clear advantage, in my eyes.
I think there are a number of interesting US banks. But one that has been increasingly appearing on my radar is US Bancorp.
The company is pretty much the biggest of the regional banks. There’s probably a greater risk of tighter regulation cutting into profits than there is with JP Morgan, but the shares are much cheaper.
I’d see either as a decent stock to buy as the financial year comes to an end. NatWest looks like the more stable offering, US Bancorp with the greater reward potential.
