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Continued economic problems cause ongoing uncertainty in the markets
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30% of investors are willing to accept less risk than 12 months ago
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The Share Centre highlights three stocks for an investment ISA
As uncertainty in the market continues, many investors are unsure over the ongoing higher risk. Graham Spooner, investment research analyst at The Share Centre, picks three stocks for an ISA to suit different risk levels.
"The continuing European debt crisis and the underlying problems in the economic environment means the markets remain increasingly volatile and uncertain. Because of this we have seen a lack of confidence amongst many investors who are currently more risk adverse. Recent research conducted on behalf of The Share Centre showed 27% of investors are worried about the uncertainty in the markets.
"Despite the fact that 30% of respondents are willing to take less risk than 12 months ago, investors are still looking to the markets for investment opportunities.
"33% of investors said they are willing to accept a low degree of risk, while just 1% would class themselves as high risk investors. There are opportunities in the market to suit all investors, whatever their risk level. Those who are wary of the amount of risk their portfolio is exposed to may want to invest in lower risk stocks with attractive yields, where as higher risk investors may look at the volatility as a buying opportunity.
"Investing in equities can deliver greater returns than cash over the long term, and as interest rates remain low people are aware that current rates on savings accounts and maturing bonds will not reflect those received in the past. We would urge investors to take advantage of the £10,680 ISA allowance available through a stocks and shares ISA. Investors can grow their portfolio without having to worry about capital gains tax."
Spooner selects Compass Group as a low risk ISA pick for the more risk adverse investors: "Compass Group has benefitted from its restructuring and successful turnaround strategy, which focuses on organic revenue generation and an acquisition approach to building a world leading brand.
"The group has some defensive qualities, as it has almost 50% of its operations in healthcare, education and defence, and it is therefore likely to be less susceptible to economic downturns.
"In these uncertain times, Compass could also benefit further from companies outsourcing catering in order to cut costs. We have high hopes for Compass in the future, the business looks financially sound, even after 27 acquisitions in the last financial year, and we expect acquisitions to continue. Income seeking investors will be interested to see the group's dividend improving."
Those willing to accept a medium degree of risk may want to add Amec to their ISA: "Amec serves a range of industries including the transport, oil and gas and power sectors and this diversity is one of the company's main strengths. The company's global exposure and potential pipeline of contracts is also attractive for investors.
"Amec's current ties and operations stand them in a good position for opportunities with top contractors, including the US Government and military establishments and the UK Government. However, competition and cuts in Government spending remain a concern for the company.
"The company's PE level is below the sector average, however we believe this could narrow and added Amec to our buy list in December. There looks to be plenty of potential for the share price to increase in the longer term and the yield is rising. Amec could provide a balanced return for investors willing to accept a medium degree of risk."
Medusa may be an attractive ISA pick for higher risk investors: "Medusa has recently concentrated on the development of its mine, which now appears to be paying dividends, as the company has increased its forecast production allied to low costs. The share price has been very volatile due to the gold price and a recent tropical storm that hit infrastructure in the Philippines which limited ore haulage. However, it has risen recently on the back of the increasing gold price.
"Investors with the gold bug may be interested in this low cost mining opportunity that has proven resources. However, this is a high risk investment as it is a small mining company in the Philippines with no diversity within the stock. Although the company hopes to pay dividends sometime in the future, it is currently only attractive to those investors seeking growth"
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