A new year is here, and it promises a new set of circumstances for investors choosing the top stocks, funds and trusts to invest in. Deciding where to invest for 2025 is a complex task; while opportunity abounds, there are various questions that investors will need to ask themselves.
For example, the FTSE 100 had a strong 2024, and many observers expect this to continue in 2025.
“Analysts think the FTSE 100’s aggregate pre-tax income in 2025 will exceed 2018’s pre-Covid peak by £78 billion, or some 46%,” says Russ Mould, investment director at AJ Bell. “Aggregate net, post-tax earnings will be £41 billion, or 31% higher.”
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Source: AJ Bell, company accounts, Marketscreener, consensus analysts’ forecasts
Then there is the big tech rally. Will this continue, as Donald Trump returns to the White House? Or are valuations already stretched too far to the extremes?
The incoming US administration is also likely to be heavily pro-crypto, and optimism for this new stance has driven the Bitcoin price to new highs since November’s election.
Finally, there is the question of how the Autumn Budget will impact the UK economy, and which stocks will thrive – or suffer – as a result.
As ever with investing, there is lots of uncertainty going into the new year, but with that uncertainty comes opportunity. Here are five stocks (or, rather, five stocks and an investment trust) that, with a bit of luck, could make interesting additions to your portfolio for 2025.
1. Broadcom
If you’re going to go in on one Magnificent Seven stock, it might as well be Nvidia (NASDAQ:NVDA).
Structurally speaking, Nvidia is a critical company. The other six stocks in the group are heavily reliant on the infrastructure that Nvidia’s AI chips make possible, and as long as the technology sector continues to grow, Nvidia’s earnings will too.
However, if you hold any US stock market trackers – particularly the S&P 500 or the Nasdaq Composite – your portfolio is already long Nvidia, and the rest of the Magnificent Seven.
A better bet might be on a challenger to Nvidia’s dominance of the AI chip industry, and at the moment, Broadcom (NASDAQ:AVGO) is emerging as the frontrunner here. Its share price exploded on 13 December when it announced that its AI revenue has more than tripled year-over-year, taking its market cap past the $1 trillion mark.
As such, your trackers are now suddenly long Broadcom, too, but it could be worth holding the stock in its own right as the long-term trajectory of the AI chip race starts to take shape.
The cautionary note, though, is that Broadcom is (even) more expensive than Nvidia. At the time of writing, its forward P/E ratio of 36.58 is slightly higher than Nvidia’s 34.05, while its trailing P/E ratio of 188.05 makes Nvidia’s 53.03 look cheap.
Perhaps it will grow into these numbers. CEO Hock Tan recently told the FT that there is seemingly no limit to Silicon Valley’s demand for AI chips, and Nvidia has demonstrated over the past two years how quickly expectations like these can transform chipmakers’ bottom lines. Buying Broadcom does imply a good deal of faith in the longevity of the AI boom, though.
2. GSK
The fortunes of pharmaceuticals stocks rise and fall with new product approvals and clinical trial success, and GSK (LON:GSK) is well-positioned on this front.
“GSK’s strength lies in its R&D pipeline, which at the time of the Q3 results had delivered 11 positive late-stage clinical updates in 2024, with five major product approvals expected next year,” says Matt Britzman, lead equity analyst at Hargreaves Lansdown.
GSK’s shares fell 7.2% in 2024, despite management upgrading guidance twice. There are headwinds. US vaccine sales could suffer, especially under Trump tariffs or if his health secretary pick, Robert F. Kennedy Jr., is confirmed; RFK, as he is known, has previously espoused anti-vaccine views.
However, according to Britzman, GSK’s “HIV treatments remain a cornerstone, contributing 20% of revenues, while the growing oncology division adds extra potential. The Zantac litigation risk has eased.
“GSK’s valuation is attractive, and the 4.9% forward dividend yield offers some income potential too – though of course there are no guarantees.”
3. MicroStrategy
MicroStrategy (NASDAQ:MSTR) used to be a niche meme stock. However, as the price of Bitcoin continues to rise – recently passing the $100,000 mark – MicroStrategy has been catapulted into the mainstream.
The caveat here is that MicroStrategy shouldn’t be approached like most stocks. The company’s business intelligence software generates about $470 million in annual revenue – approximately 0.5% of its market cap.
MicroStrategy’s seemingly absurd valuation is accounted for by the fact that it has adopted a unique strategy of buying Bitcoin onto its balance sheet, becoming the world’s largest corporate holder of Bitcoin in doing so. Its stock has therefore become a leveraged proxy for the Bitcoin price.
“Bitcoin cannot be held in an ISA or pension so investors found alternative ways to get exposure via listed companies,” says Dan Coatsworth, investment analyst at AJ Bell. MicroStrategy has become a firm favourite among investors who want Bitcoin exposure, making the top 10 most-traded stocks on AJ Bell’s platform in 2024.
This isn’t one to allocate heavily to, as it is a risky play even compared to the highly volatile Bitcoin price. However, there is reason to think that, under an incoming Trump administration that is expected to be highly pro-crypto, MicroStrategy could see further gains next year.
4. Greencoat UK Wind
“Both infrastructure and renewable energy offer investors potential for income and growth,” says Emma Wall, head of platform investments at Hargreaves Lansdown, adding that they also provide “good diversification to a portfolio that already owns stocks and bonds”.
Greencoat UK Wind (LON:UKW) is an investment trust that invests into renewables infrastructure projects. Understandably, it took a battering last year – shares fell 15.7% through the year – as the economic climate steered investors away from these kinds of longer-term, capital-intensive sectors.
“Inflation and interest rates have proved headwinds for infrastructure. [but] the macro-environment is – slowly – changing,” says Wall.
Infrastructure investments and green energy are likely to be key priorities for the Labour government, with significant investment promised in October’s Budget.
The fall in its share price means that Greencoat is now trading at a 20.4% discount to NAV, despite a dividend yield of 7.7%. Now could be an opportune moment to buy into this sector at a discounted rate.
5. Kingfisher
It's a tricky time to invest in UK retail, so Kingfisher (LON:KGF) – the owner of DIY stores like B&Q and Screwfix - is something of a contrarian pick.
Shares traded sideways last year, gaining 2.2%, but this ignores a recent 13% slump following a warning that the Autumn Budget would hit next year’s profits by £31 million, not including an estimated £14 million hit to its French chain Castorama thanks to tax changes in France.
However, companies have to play it safe when it comes to profit warnings. The market reaction feels overblown; the hit represents less than 10% of pre-tax income based on last year’s results, and could be mitigated by price increases.
Kingfisher could also benefit from its rival Homebase going into administration; it is already reportedly swooping in to buy up Homebase stores on the cheap. There will be some latent demand once Homebase closes, regardless of the industry’s struggles, so there is a plausible likelihood that Kingfisher’s current pricing represents a low.
12 month price forecasts from analysts polled by London Stock Exchange Group see the stock gaining 12.6% at the median, with a high target implying 55.6% gains.
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