Investors looking to use up the last of their ISA entitlement for the current financial year can do so in good heart. The economy continues to improve and Chancellor George Osborne is unlikely to do anything rash to jeopardise his political advantage in the Budget next week. If he is foolish enough to make a blatant giveaway he will surely wait until next year, just before the election is due rather than deliver it now.
Shares have been depressed by concerns over the situation in Ukraine, a fall that has presented a buying opportunity. I agree wholeheartedly with the British Chambers of Commerce that the UK economy will finally be back to pre-recession levels this year and latest figures for manufacturing indicate that the beleaguered sector is improving.
The economy is currently 1.4% below its peak and BCC thinks that level will be reached in the second quarter. I am slightly less optimistic but even so I think the cause for celebration will come only one quarter later. The recovery may be fragile but the recession is truly over.
So although the situation in Ukraine will continue to hang over markets, I remain confident that shares will recover. The big surprise in the Crimea is how restrained Russian President Vladimir Putin has remained considering he holds so many trump cards. The potential financial losses that the oligarchs who support him face have proved more potent than most of us in the West expected.
The slowdown in China is another negative, although the world’s second largest economy is still growing. Part of that slowdown is due to Western countries, the United States in particular, ‘reshoring’ manufacturing back home, which is a positive, not a negative, factor.
There are plenty of decent investment choices on the London Stock Exchange and this week we will look at just a few of them.
I still like 
Sainsbury (SBRY) as the best of the supermarkets, and possibly the best in retailing. Despite my concerns about how the future will pan out after the departure of the inspirational chief executive Justin King I was sorely tempted to increase my stake this week.
Only the fact that Sainsbury is already the largest holding in my portfolio discourages me. That turned out to be a piece of luck as Sainsbury shares crashed this week, very unfairly in my view. I cannot see any rational explanation of why Sainsbury should fare worse than Tesco (TSCO) or Morrison (MRW). Sainsbury shares now look remarkably cheap.
Tesco’s UK market share continues to slide and despite it still being the country’s dominant supermarket chain it looks increasingly vulnerable, not only to Sainsbury but also to the discounters. One increasingly feels that it has lost its way, though not to the extent that Morrisons has.
Morrisons needs to spend to build its online presence and move into convenience stores, where the growth is. Now it has decided to take on the discount chains, which will deal another blow to profits and risks leaving Morrisons squeezed even more.
Chief executive Dalton Philips says it is a bold move. It could equally be seen as a desperate one.
In pharmaceuticals, there is a tough choice between GlaxoSmithKline (GSK) and AstraZeneca (AZN). Both offer decent yields and reasonable P/E ratings. Glaxo is better for yield; Astra has the less demanding rating. The yield won for me and I topped up Glaxo this week to make it one of my biggest holdings. However, I would certainly not discourage any investor from choosing Astra.
Banking has still not put all its scandals into the past but Lloyds has demonstrated that you can invest with greater confidence. Congratulations to those who had the courage to buy at anywhere below 40p. Although Lloyds (LLOY) has tripled from its low of 23p it is not too late to buy for the long term. The prospect of a small dividend this year is already factored into the share price and there will be further disposals of government-held stock but once that overhang is removed the shares should rise strongly.
I feel that HSBC (HSBA), in which I have a holding, has been oversold on worries over China and Barclays (BARC) is also a sensible buy.
In the oil sector it is difficult to find companies with a decent yield and a reasonable P/E rating. Royal Dutch Shell (RDSB), in which I own shares, and BP (BP.) stand out but question marks remain over the settlement of Gulf of Mexico oil spill claims and over operations in Russia, so for me it has to be Shell – UK investors should buy the B shares – despite news that BP is no longer banned from US government contracts.
Alternative Investment Guidance
Plans are in hand for the Alternative Investments Show at Olympia on May 16 and I have been booked to run the first workshop, which will look at the range of investment options available to private investors. Although I am primarily an investor in UK shares, I am a great believer in the merits of spreading investments and I shall look at each alternative fairly and honestly.
I shall also be available to talk to delegates throughout the day. Make a note of the date. More updates will follow in the column.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.
