US stocks high up the list for AJ Bell ISA customers

Stocks that provide exposure to the US market and offer ways to play the artificial intelligence theme have been among the most popular choices for AJ Bell customers investing in an ISA between the start of January and the end of the tax year on 5 April. With some of the best gains in recent years having come from US shares, it’s no wonder investors have fished for opportunities across the pond.

Four out of the top 10 most popular stocks for AJ Bell ISA transactions by net flows are listed in the US. At the top is chips giant Nvidia which has delivered stellar share price gains since early 2023.

Source: AJ Bell. Data 1 January to 5 April 2024

Having been last year’s best performing stock in the US (+239%) and been responsible for much of the Nasdaq’s gains, ISA investors appear to have taken the view that the AI theme remains red-hot which presents further opportunities for Nvidia to grow earnings. This would have been a fruitful call for anyone buying at the start of 2024, given how the shares had extended last year’s rally to deliver a further a 78% gain between 1 January and 5 April.

Tech remains popular

Successful investing is often about looking for opportunities away from the mainstream and one multi-billion-dollar stock has attracted quite a bit of interest from AJ Bell customers despite being relatively unknown in the UK.

Samsara has been a hit with people investing in their ISA this year, perhaps because it offers a different way to play the AI theme rather than going down the obvious route of Nvidia or one of the big tech providers. Samsara runs a platform that brings together important operational data for businesses and governments, and it uses video technology that incorporates artificial intelligence.

In third place on the ISA list is Microsoft, seen as a trusted way to play the tech space. Millions of people use its programmes on their computers, laptops and phones, while it is also a major player in the gaming space.

So many people rely on its technology and pay a monthly subscription fee that Microsoft benefits from constant cash inflows and sticky customers.

Tech is paramount to modern lives and parking one of the world’s biggest tech players in an ISA is a logical move for investors to take. It also helps that Microsoft is embracing AI in some of its services, giving it extra appeal to investors.

Income investors

ISAs are among the best gifts a government has ever given an investor. All the capital gains and income are sheltered from the taxman, meaning the investor gets to keep everything they make.

Everyone using ISAs is united in the quest to make money, whereas the reasons why they are trying build wealth can vary from person to person. Paying for a home deposit, funding a dream wedding and putting children through university are all important reasons to invest and the investment purpose has a bearing on the types of investments people make.

The desired rewards from a portfolio often change when the investor reaches retirement as they shift from a focus on wealth accumulation to drawing on an income from their investments to help pay the bills.

That’s why dividend-paying stocks remain a big draw in ISAs, particularly as some people like to dip into their ISA first at retirement and leave their pension untouched for as long as possible.

Lloyds becoming less popular

One might expect ISA investors to always gravitate towards an obvious group of blue chips such as banks like Lloyds and NatWest which have been popular stocks for decades. However, it seems some of these names are no longer cutting the mustard with investors.

Lloyds does not feature in this year’s top 10 most popular stocks on a net flow basis or net buys by AJ Bell customers. Barclays, another previous long-time investor favourite, was the least popular stock based on net outflows during the period.

Banks have been challenging investments over the years as share prices have often fallen by a greater amount each year than returns generated from dividends. Perhaps burned by this experience, income investors are starting to show a preference for the life insurance sector instead, with Phoenix and Legal & General popular ISA purchases.

Finding ways to get bitcoin exposure

Investors have also shown an appetite for higher risk, with stocks linked to bitcoin in demand during ISA season. Bitcoin miner CleanSpark is in the top 10 most popular stocks based on net flows among AJ Bell ISA customers year-to-date while business intelligence firm MicroStrategy, which holds 214,246 bitcoin worth approximately $15 billion, is just utside of the top 10 based on net buys.

The cryptocurrency has gone up by more than 60% in value this year and this price action might have encouraged people to look for ways to get exposure via their ISA. UK investors aren’t allowed to buy US-listed bitcoin ETFs and you can’t hold bitcoin directly in an ISA, which means looking at alternatives such as listed companies which hold the cryptocurrency as an investment asset or are involved in its infrastructure.