5 First-Time Shares

Published in Investing on 28 March 2012

A new Fool opens his ISA and picks his first five investments.

It is never too early to begin investing, and no amount of spare cash is too small to open up your first stocks and shares ISA account. These are two lessons I've learnt since joining the Motley Fool team and, as someone in their mid-twenties and without many financial commitments, I've decided to put my money where my mouth is and detail which five shares I'm planning to put into my very first stocks and shares ISA.

Tesco

With fears that the market won't pick up for a number of years yet, a Foolish (rather than foolish) bet would be to invest in defensive stocks for the long term -- stocks that people will continue to buy throughout austerity regardless. People tend to eat at home more than out at restaurants during these downturns, so supermarkets tend to do well during these times -- inevitably, the likes of Tesco (LSE: TSCO), J Sainsbury (LSE: SBRY) and Wm Morrison (LSE: MRW) are prime candidates for investment.

While Sainsbury's has seen improved sales, Tesco saw a drop in its share price earlier this year after a profit warning in January -- which immediately led to super-investor Warren Buffett making good of his word and upping his stake in the supermarket when the opportunity presented itself. 

Although the share price has climbed since that initial drop, Tesco's plan to reassert itself as the leader in the UK grocery market, alongside its continuous strategy to expand internationally, leads me to think it's still a worthy investment at this stage. Indeed, off the back of the news that Sunday trading laws will be suspended on eight weekends around the Olympics and Paralympics, I currently see Tesco's shares as being cheap and want to get in while they're still affordable.

GlaxoSmithKline

Britain's biggest pharmaceutical group, GlaxoSmithKline (LSE: GSK), is a global blue-chip company and included in the exclusive 'Big Pharma' group. Although not an exciting stock to hold, it is well revered for paying out substantial dividends on a regular basis, with the added bonus that it has a track record of increasing its dividend over time as well.

I still have faith in the pharmaceutical company's success, despite patents on some drugs being close to expiration -- as Alan Oscroft wisely wrote, "The trick, of course, is to keep profitable new drugs coming out of the research pipeline." And with the news following this year's Budget that Glaxo is to take advantage of a tax break and invest £500m into expansion that will see 1,000 new jobs in Cumbria and Scotland, as well as a new factory -- the group's first in the UK in 40 years -- the future looks good. 

This is firmly a stock for the future -- one I plan to hold and add to over time, with a view to the high yields in my portfolio eventually providing a worthwhile stream of income, and Glaxo has the potential to be a main contributor towards this.

Zipcar 

At my age, it makes sense for me to invest in growth stocks as I have comparatively little investment and lots of time on my side. ASOS (LSE: ASC) and SuperGroup (LSE: SGP) are good examples of companies that have grown drastically due to demand from the youth sector but, of course, retail isn't the only sector that high-growth companies can thrive in -- especially amid the uncertainty on the high street currently.

Back in December last year, US Fool Rick Aristotle Munarriz wrote a piece highlighting the popularity of Zipcar (NASDAQ: ZIP.US), the car-sharing service that bought out Streetcar last year. 

A number of friends had used the Streetcar service when moving house, which first brought it to my attention, and I've increasingly seen more of this firm's cars on the roads of London. In today's belt-tightening climate, as well as an increased awareness of environmental matters, Zipcar seems like a good route to save a not insignificant amount of money for many urbanites -- and having heard the company upping its marketing campaign with advertisements on the radio station I listen to, I think it is time to get in before the share price soars even further.

SeaEnergy

Elsewhere, the oil and gas sector is home to many of the FTSE 100's big hitters: the recovering giant BP (LSE: BP) and Cairn Energy (LSE: CNE) among them. 

But I'm looking for a share to help me, well, strike oil (pun intended) -- and I'm not going to find a double-bagger by backing one of the big guns. Instead, I like the look of SeaEnergy (LSE: SEA) as a high-risk, but potentially a high-reward route into oil and gas. As fellow Fool Roland Head stated, SeaEnergy has interests in Iraq, Bulgaria and the North Sea, but it is the confirmation of light, sweet crude oil in the North Celtic Basin Area of the Irish Sea, as announced by Providence Resources (LSE: PVR) and Lansdowne Oil & Gas (LSE: LOGP) earlier this month, that interests me. 

SeaEnergy has a 25% share in Lansdowne, which jointly owns the Barryroe Well with Providence (20% and 80%, respectively). You could say it is an 'Irish punt', but maybe one that could put a smile on my face in five years' time...!

Nuance Communications

The share that I was to award my final place was a little trickier to decide. I toyed with the idea of investing in Starbucks (NASDAQ: SBUX.US), as an important value for me when choosing stocks is to look for plans to expand and improve the business internationally. The Seattle-based company's preoccupation with entering China and India in recent years led to somewhat ignoring its presence in Europe, but now it's got its house back in order, Starbucks is looking to finish the job it started, beginning with 300 new stores opening here in the UK.

I also strongly considered Chinese internet giant Baidu (NASDAQ: BIDU.US), known unofficially as China's Google (NASDAQ: GOOG.US), which is casting furtive looks towards the rest of Asia with a view to expansion. But I was put off investing a large amount of money by the fact that it currently doesn't pay out a dividend.

In the end, I wanted to try and hitch a ride on the wave of new technology that is emerging in the devices that dominate our day-to-day lives. I am an owner of a Google Android smartphone rather than Apple's (NASDAQ: AAPL.US) iPhone, unlike most of my peers. However, I watched their reactions to the addition of 'Siri', the voice-recognition-driven "'personal assistant' that is powered by Nuance Communications (NASDAQ: NUAN.US), and I believe that this is the future of technology, especially within mobile devices.

Now, many thought that the new iPad would feature Siri, so it was a bit of a shock when it didn't make it onto the new model. As a result, the Nuance share price has dropped back down slightly after investors backing the company pre-iPad launch had sent the price soaring. But I see this as a good opportunity to invest in the business while the share price is affordable. Apple has a reputation for high-quality products, so if it wasn't ready to integrate Siri into the latest model of its iPad, then it would have had a good enough reason to wait until the next generation is released.

Furthermore, Nuance is a market leader in voice-recognition software. A few months ago, it bought out one of its main competitors in the area, Vlingo, while tech stalwart IBM (NYSE: IBM.US) threw in the towel on its ViaVoice software a while back. With little competition in an area I'm backing to take off over the next few years, I'm planning to give the final place in my portfolio to Nuance.

> The Motley Fool has just published its ISA Guide 2012, which explains the tax-efficient shelters in full. Download your copy of the report today -- it's free!

> The Motley Fool owns shares in Tesco, GlaxoSmithKline and Google.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

ElGuapo735 29 Mar 2012 , 12:49pm

Good article, I am also in my mid-twenties and have been interested in investment for around 2 years. I've mainly invested in funds so far but starting to open up into individual shares and might open up a Trading ISA rather than S&S Fund ISA for 2012/13.

Why exclude AZN? It has a yield more than 1% more than GSK and around half the P/E.

TMFSamR 29 Mar 2012 , 2:49pm

Hi ElGuapo375, thanks for the comment.

For me, there's not much to choose between these two Big Pharmas, but I've backed GSK due to its steady performance over the last 12 months while AZN's has dipped -- for some, it's a buying opportunity, and it may well be for me at some point in the future, but I opted for the security of GSK as my portfolio's 'safe stock'.

Vortice 30 Mar 2012 , 9:25pm

Hi,

Sea Energy isn't available for an ISA being AIM only listed. Range Resouces looks interesting, however and is compatible with an ISA.

spyknife 23 Apr 2012 , 11:59am

Banco Santander (BNC) is good value at the moment(£3.78 today) and in the long term(1-2years) will pay good rewards for those that are brave.

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