2 S&P 500 stocks I like that would offer my ISA something different

Jon Smith talks through two shares from the S&P 500 that he thinks would add value that he can’t find from this side of the pond.

| 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.

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.

My ISA is a great place where I can invest in a tax-efficient manner. Yet contrary to what some people think, I don’t just have to buy UK stocks for it. In fact, I can buy and hold large-cap S&P 500 stocks. This is great because it allows me to build a more diversified portfolio. Here are two US shares that I have on my watchlist right now.

A safe pair of hands

The first company on my list is Visa (NYSE:V). The global payment card services provider offers me something different as there isn’t any major UK stock that’s comparable. There are banks and financial service providers, but nothing comes close to Visa.

Over the past year, the stock is up 13%. Despite being a large and mature company, it’s still managing to post impressive growth numbers. For example, in the latest quarterly results from July, net revenue grew by 11% versus the same period last year. This helped to filter down to a 20% increase in the earnings per share.

The firm is continuing to increase payment capabilities through partnerships. Over the past year or so, this includes deepening relationships with the likes of Stripe, as well as more specific ones like CIBC in Canada and Moniepoint in Africa. Evidence of the success can be seen from the fact that total processed transactions for the quarter was 59.3bn, a 10% increase from the year prior.

In my view, there’s still plenty of opportunities out there for Visa to boost profitability going forward. However, there’s increased chatter about a potential US recession later this year. If seen, customers would likely reduce card spending to save money, which would be a negative for Visa.

A defensive tech share

A second stock I like is Salesforce (NYSE:CRM). The share price is also up 13% over the last year, but it’s some way off the highs from Q1 of this year.

The tech firm provides customer relationship software, often used by businesses for the sales or client services teams. I’ve used the software in the past and really liked it. Although it has some competition, it has a strong hold of the marketplace. There isn’t really a UK stock I can think of that is comparable.

The reason why I’m considering adding this to my portfolio is because it combines the appeal of a US tech stock alongside being a more defensive idea. On the one hand, it should stand to gain if the tech sector keeps roaring on like it has in recent years. Yet if we do get a slowdown in the US, Salesforce should be able to withstand this better than others. This is because businesses rely heavily on the software used. Given the nature of the contracts, it’s not like companies can (or would want) to cut things off swiftly.

One risk is that the stock does have a high price-to-earnings ratio. It currently stands at 35.03, which is well above what I would call a fair value. This could indicate that the stock is overvalued.

Both ideas are on my watchlist to purchase when I have more free cash.

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.

Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended Salesforce and Visa. 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 US Stock

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

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

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

US Stock

The Nvidia share price falls! Here’s what I think happens next for the S&P 500

Jon Smith reviews the overnight results from Nvidia and explains why this could stall the S&P 500 performance through to…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

2 Trump-hit stocks that look like golden opportunities for my Stocks and Shares ISA

This investor's weighing up a couple of world-class companies for his Stocks and Shares ISA after the US election sparked…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
US Stock

Warren Buffett just bought and sold these stocks. Here’s why I don’t agree

Jon Smith takes a look at the recent regulatory filing for Berkshire Hathaway and Warren Buffett and comments on recent…

Read more »

US Stock

My favourite US growth stock’s up 33% this year. I think it’s just getting started

Edward Sheldon's taken a large position in this well-known S&P 500 growth stock. And so far, it’s working very well…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

ETFs are soaring! Here’s a star fund for Stocks and Shares ISA investors to consider

This exchange-traded fund (ETF) has risen 24% in value since last November. Royston Wild thinks it has room for significant…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
US Stock

This is a huge week for Nvidia stock

It’s a make-or-break week for Nvidia stock as the company is posting its Q3 earnings on Wednesday. Here’s what investors…

Read more »