Investing in a Stocks and Shares ISA strikes me as a good way to grow my wealth. It’s tax-efficient for me and gives me the flexibility to invest in a wide range of investments. As the UK market struggles this week, there are four UK shares I’d potentially buy within my ISA wrapper.
Two defensive dividend-paying shares
As part of my aim to have a portfolio with a mixture of growth, value and income shares, I’ll start by looking at two defensive, dividend-paying shares. Defensive shares are companies that have robust business models that can weather economic turbulence. This means their shares could hold up better if there’s a stock market crash and I won’t have to worry about them too much.
The first dividend-paying share I’d hold would be Admiral. The Welsh insurance giant has seen its share price increase by just over 25% in the last 12 months. This was helped in no small part by results in August 2020 that showed pre-tax profit rose 31% to £286.1m for the six months to 30 June. Admiral also reinstated its special dividend at the same time.
My second pick would be National Grid, in which I already hold shares. The outlook for the shares has improved in recent months. There have been some concessions from the regulator Ofgem on investment and the returns the regulated utility company can achieve.
So even as there is talk of National Grid being stripped of its electricity operator system role, there is much I like about the utility company. Especially from an income perspective.
Both shares face risks though. In Admiral’s case, car insurance premiums sometimes come under pricing pressure and insurance is a very competitive industry. For National Grid a key risk is the fact it can’t increase prices in its regulated business.
Two growth shares for a Stocks and Shares ISA
To provide my ISA with greater potential for capital gains I’d also invest in some companies with bigger potential to grow faster. The first would be the miner Sylvania Platinum. It’s a low cost producer of platinum group metals (PGM). With a P/E still below 10 and profits and revenue increasing rapidly I’ll be looking very likely to add this share to my portfolio at some point in the coming months. One of the big risks to this share though is platinum prices might fall, something beyond its control.
Gamma Communications is another growth share on my watchlist. It’s a supplier of Unified Communications as a Service (UCaaS) in the UK, Benelux countries, German and Spanish business markets.
The shares have a high P/E, in line with other technology shares, which means if future performance disappoints, the price could fall. However, the company did announce this month that results would exceed expectations. As long as it can keep up this strong growth, the valuation seems reasonable to me. It also has net cash of nearly £50m so should have the funding to get through the current crisis period.