Recently, Hargreaves Lansdown revealed the top 10 shares held by its ISA millionaires. The shares were: Astrazeneca, Aviva, BP, GlaxoSmithKline, Legal & General, Lloyds, National Grid, Rio Tinto, Shell, and Unilever.
There’s no doubt that the ISA millionaires are an astute bunch of investors. So, should I follow them and buy these stocks for my own ISA? Let’s take a look.
ISA millionaires like dividend shares
The first thing that strikes me about this list of stocks is that it’s full of dividend shares. There are many high-yielders there.
That makes sense when I think about it. According to Hargreaves Lansdown, the average age of its ISA millionaires is 72. So, most are probably in retirement, and looking to generate income from their investments. These shares could certainly generate some healthy income. My calculations show that the average yield across the 10 stocks is about 5.1%.
The thing is, my financial goals are most likely quite different to those of the average ISA millionaire. As an investor with a time horizon of 20 years or more, I’m looking to generate growth instead of income. By focusing on growth stocks today, I should hopefully be able to reach my financial goals (becoming an ISA millionaire is one) faster.
So, instead of investing in high-yield dividend stocks such as Aviva and National Grid, I’d be more inclined to go for a growth stock like Amazon. It appears to have decades of strong growth ahead of it.
The world is changing
A second observation is that there are several companies on the list that have been successful in the past, yet are now facing long-term structural challenges.
One example here is oil giant Shell. It’s doing pretty well at the moment due to the fact that oil prices are so high. Yet in the long run, it could struggle due to the global shift to renewable energy.
Another example is UK bank Lloyds. It could face plenty of competition from disruptive financial technology companies and digital banks in the years ahead.
Instead of investing in companies facing structural issues, I’d prefer to invest in companies that are set to benefit from powerful megatrends. One example of such a stock, in my view, is Visa. In the years ahead, trillions of transactions are set to shift from cash to card, and Visa should benefit.
Ultimately, what has worked for ISA millionaires in the past isn’t necessarily going to work for me going forward. Today, the world is changing at a rapid rate.
ISA millionaire stocks I’d buy
Having said all that, there are some stocks on this list I’d be happy to buy today.
One stock I’d be comfortable buying is financial services company Legal & General. I’m bullish on this company as I expect its profits to rise as people save more for retirement in the years ahead and global stock markets rise over time. The stock also looks very cheap right now.
Another ISA millionaire stock I’d snap up is consumer goods company Unilever. It generates around 50% of its sales from the emerging markets, so it should benefit as wealth across emerging market economies rises in the years ahead. Its share price has pulled back recently and I see the valuation as attractive. I think it could play a role as a ‘defensive’ stock in my growth portfolio.
Of course, there’s no guarantee these stocks will perform well going forward. Both face their own unique risks. All things considered, however, I like their risk/reward profiles.