You’ll know the names — Apple, Microsoft, Alphabet, Amazon, Meta Platforms, Nvidia, Tesla — with each rising over 100% in the past five years, and some many times more than that. But which British shares would Fool.co.uk contract writers invest in over those seven today?
Diageo
What it does: Diageo manufactures and distributes premium drinks in nearly 180 countries.
By Paul Summers. Since I’m wary of being overly invested in a small band of (very) highly valued tech stocks, I’d prioritise buying stakes in established companies with more attractive price tags. One example is premium drinks firm Diageo (LSE: DGE).
Right now, the market hates this company. Shares have slumped back to lows hit during the pandemic as the cost-of-living crisis has hammered sales. There are also concerns that lower alcohol consumption in younger people could hamper growth going forward.
I think the drop is overdone. While alcohol consumption is falling, the world hasn’t suddenly turned teetotal. Moreover, Diageo is such a huge player that the odds are high that people will pick from its 200+ brands when they fancy a tipple. I also expect sales to recover as inflation continues to cool.
Meanwhile, a forecast price-to-earnings (P/E) ratio of 17 is significantly below the company’s five-year average of 24.
Paul Summers has no position in Diageo.
L&G Artificial Intelligence UCITS ETF
What it does: L&G Artificial Intelligence UCITS ETF tracks a basket of companies that make significant revenues from AI.
By Royston Wild. It’s clear that the global artificial intelligence (AI) sector should experience spectacular growth over the next decade. Analysts at Statista think the market will show an annual growth rate of around 28.5% between now and 2030.
Predicting who will be the big winners at this early stage is a difficult task, however. Microsoft and Nvidia have (arguably) impressed the most so far. But will they still be at the front a decade from now?
Purchasing an exchange-traded fund (ETF) could be a profitable way for investors to exploit the AI boom while also hedging their bets. The L&G Artificial Intelligence UCITS ETF (LSE:AIAG) is one such instrument on my radar today.
The fund tracks the performance of 58 companies and has a significant weighting to the US, as you may expect. Prominent names include those two mentioned above alongside Alphabet, Darktrace and Palo Alto.
I also like this fund because its 0.49% management fee is one of the lowest in the business.
Remember, though, that while an ETF helps investors reduce risk, a fresh industry downturn could still pull its market value sharply lower.
Royston Wild does not own any of the shares mentioned above.
Scottish Mortgage Investment Trust
What it does: Scottish Mortgage is a UK-listed investment trust focusing on opportunities in growth-oriented sectors.
By Dr James Fox. I’m actually pretty bullish on big tech and hold shares in two of the Magnificent Seven – Nvidia and Meta. So the UK stock I’d buy ahead of the Magnificent Seven is Scottish Mortgage Investment Trust (LSE:SMT).
The Baillie Gifford trust has a great track record of investing in the tech big winners of tech and currently has holdings in Nvidia, Amazon, Mercado Libre, and Tesla, among others.
While I may not agree with all the trust’s holdings, with a team of analysts and no doubt a great model for picking stocks, I’m confident that the stock’s trajectory will be a positive one over the long run.
It’s important to recognise that Scottish Mortgage has positions in unlisted stocks, and that can make valuations a challenge. After all, the stock market doesn’t value unlisted stocks.
However, with its excellent track record, and exposure to growth-oriented companies, I’d buy Scottish Mortgage over Magnificent Seven right now.
James Fox owns shares in Scottish Mortgage Investment Trust.
Scottish Mortgage Investment Trust
What it does: Scottish Mortgage aims to invest in the world’s best growth companies across both public and private markets.
By Ben McPoland. Right now, I’d rather invest in Scottish Mortgage Investment Trust (LSE: SMT) ahead of the Magnificent Seven stocks. Partly this is because over half of them are already in the FTSE 100 trust’s portfolio (Amazon, Meta, Nvidia and Tesla). So I’d get some exposure to the ongoing growth of these world-class businesses.
Moreover, as I write, I’d get to invest in the trust at a 9% discount to net asset value. This could be a cheaper and less risky way to invest in these mega-cap stocks.
I’d also gain exposure to the rest of the portfolio, offering diversification compared to buying the Magnificent Seven stocks individually.
Of course, this approach wouldn’t be risk-free. Around a third of Scottish Mortgage’s assets are in AI-related shares, notably in the semiconductor industry. Any sector-wide slowdown here could result in a sharp pullback in the share price.
Looking to the future though, the portfolio contains small companies that the managers think could one day become the next Magnificent Seven-type winners. These span emerging industries like quantum computing (PsiQuantum), lab-grown meat (Upside Foods) and carbon capture (Climeworks).
Ben McPoland owns shares in Tesla and Scottish Mortgage Investment Trust.
