Time’s running out to load up on this year’s Stocks and Shares ISA allowance and I’m accelerating my search for top UK shares. So I decided to cut corners by asking ChatGPT for help. I told it I wanted to create the perfectly balanced portfolio from just five FTSE 100 stocks.
ChatGPT isn’t a stockpicker. It doesn’t have ideas of its own. It just sucks up stuff from the web, and regurgitates. So I had to feed in careful criteria. Then I asked for a balance between growth and income, and undervalued and momentum stocks, across different sectors. I did most of the legwork myself. Which is at it should be.
AI really rates AstraZeneca
Its prime pick was pharmaceutical giant AstraZeneca (LSE: AZN). Which just happens to be the biggest stock on the FTSE 100. An absolute beginner might have picked that.
My ‘bot bro’ said few companies combine defensive resilience with growth potential like this one, as it “its global presence and strong drug pipeline make it a long-term winner”.
It warned AstraZeneca’s valuation isn’t cheap, with a price-to-earnings (P/E) ratio of just under 20. Personally, I’d also have cautioned that high investor expectations mean if its drugs pipeline slows, or Donald Trump attacks big pharma, the shares could take a hit.
ChatGPT’s next pick was insurer Legal & General Group, which it calls “a long-term play on the UK’s ageing population”. Its shares rarely go anywhere, but the 8.9% yield certainly dazzles.
Since I own the stock, I can’t argue with this pick. But ChatGPT got its P/E horribly wrong, claiming it trades at seven times earnings when in fact it’s a whopping 82.8 times. That follows a recent earnings slip that ChatGPT somehow missed. As ChatGPT admits, it can make mistakes. Absolutely.
I also own its next selection, consumer goods group Unilever. Again, I had quibbles. Yes, Unilever owns powerful global brands, such as Dove, Persil and Magnum, and yes, “it delivers steady income and resilience, even during downturns”.
But ChatGPT didn’t mention that the board has lost its way in recent years, forcing it to replace CEO Hein Schumacher after just 19 months. Nor did it mention the threat from tariffs.
I rate all of these FTSE 100 shares
I don’t own Rio Tinto, ChatGPT’s choice from the mining sector, but wish I did. It looks brilliant value with a P/E of just nine, while yielding 6.6%.
Like every commodity stock, it’s been hit by Chinese troubles and the wider global slowdown, with full-year 2024 earnings falling short of estimates. ChatGPT didn’t highlight either, just stuck to generalities. At least it got the P/E right this time. I still think Rio Tinto is worth considering with a long-term view.
Finally, ChatGPT served up a proper growth stock – and a good one – via Information and analytics firm RELX. It said it’s “quietly one of the best-performing FTSE 100 stocks in recent years, thanks to its subscription-based business model”.
RELX is expensive, with a P/E over 30, but now could be a good time to consider it with the shares down 10% in the last month. That’s me saying that, by the way. ChatGPT never mentioned it. The chatbot is great fun to play with, but I’ll never treat it as a serious investment tool.
