With new rules coming into effect next year, investors are restructuring their Stocks and Shares ISAs. Recent data reveals renewed interest in shares such as Lloyds, Legal & General, NatWest, Barclays, AstraZeneca, Rolls-Royce and HSBC.
Several appeared among the 10-most-bought shares on leading investment platforms during the past week (to 2 October).
But whenever investors rush into the same stocks, I wonder whether they’re buying because the shares look attractive – or simply because everyone else is buying them.
Popularity can be a useful starting point, but it isn’t an investment case. Are these ISA favourites tomorrow’s heroes, or yesterday’s winners?
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The list doesn’t point to one neat theme, including a variety of stocks in finance, pharmaceuticals, and aerospace. Yet many FTSE 100 names offer relatively attractive income, while several have already produced strong share price performances.
The figures cover real-time trades, excluding regular investing instructions, and combine existing funds with new money. They’re a useful snapshot – but not a complete picture of every UK ISA.
The banking sector also fell 8% in September, which may explain why investors viewed these shares as bargains.
Income may be another reason. Finance stocks have long been popular among dividend investors, while AstraZeneca and Rolls-Royce offer exposure to businesses many investors understand.
But dividends depend on profits and cash flow, not just share sales. And if buyers ramp up the share price, that attractive yield might not look so good tomorrow.
That said, one bank stock in particular has piqued my interest.
A closer look at NatWest
NatWest Group (LSE:NWG) offers the kind of balance that could suit a retirement-focused ISA. It’s one of the UK’s biggest banks, offers income-focused investors a dividend, and provides exposure to the domestic economy.
On top of that, its low valuation is far more attractive than high-priced US technology shares. Sure, ‘cheap’ doesn’t always mean ‘good value’ – but NatWest makes a strong case.
Its latest half-year results, released on 31 July, showed:
- Income of £8.7bn, up 8.9% year on year (excluding notable items).
- Operating profit of £4.3bn.
- Return on tangible equity of 19.7%.
- CET1 ratio of 13.2%.
The bank announced a 12p interim dividend per share and expects 2026 income, excluding notable items, to be around £17.9bn. Management also expects return on tangible equity (RoTE) above 19%.
These figures explain the attention, but they don’t remove the risks.
These include uncertain interest rates and a somewhat wobbly economy. If household finances deteriorate, more customers could struggle with repayments and bad debts could rise. NatWest’s UK focus offers domestic exposure, but limits diversification when conditions weaken.
Popularity isn’t a strategy
I understand why investors are buying these names. They’re familiar, many pay dividends and some have looked cheaper after sector weakness. NatWest looks worth considering for an investor seeking income and banking exposure. Its latest numbers are encouraging, and its 13.2% CET1 ratio provides resilience.
Still, stock-picking should reflect an investor’s objectives, time horizon and ability to tolerate losses, rather than a popularity list. An ISA can shelter investments from tax, but it can’t protect capital from a falling share price. Before buying, check valuation, dividend sustainability, debt and sector concentration.
These popular names may contain genuine opportunities. The interesting part is working out which still offers value after everyone has noticed them…
Should you invest £5,000 in NatWest Group Plc right now?
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Mark Hartley owns shares in Lloyds, Legal & General, AstraZeneca, and HSBC.
This story originally appeared on Motley Fool
