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When I buy and sell UK shares, I rely on my own research. That said, I'm open to anything, including chatbots.
artificial intelligence (ai), as ChatGPT humbly admitted, is no substitute for human expertise. When I asked him to name two FTSE 100 shares that he would sell in the blink of an eye, he responded: “I'm not a financial advisor, so I can't offer specific stock recommendations.”
However, he listed broad reasons for selling shares, including weak fundamentals, falling revenue, high debt, poor management, difficult sector conditions and overvaluation. Pretty obvious, I thought.
Perhaps sensing my disappointment, ChatGPT surprised me by adding: “Companies like Central (LSE: CNA) or BT Group (LSE: BT.A) have faced scrutiny due to operational problems or stagnant growth.”
What is Centrica's problem?
Curious, I asked why he had flagged Centrica. ChatGPT noted that core business British Gas faces intense competition from smaller energy suppliers offering cheaper deals and stealing market share.
Centrica's board has also spent the last few years restructuring, cutting jobs and selling non-core assets, which ChatGPT suggested could “sign of instability or difficulty in adapting to market conditions”. The company also faces the costly challenge of abandoning fossil fuels amid falling energy prices and extraordinary taxes.
Given all this, I was surprised to see that Centrica's share price has soared 95% in the last three years. Although it has fallen 2.5% in the last 12 months.
The shares are dirt cheap, trading at just over four times earnings. While the dividend yields a modest 3%, share buybacks and a net cash reserve of £3.2bn add appeal.
However, I share my robot friend's skepticism. As an energy explorer and utility owner, it's a tough hybrid to navigate. I already own PAso it does not need more exposure to energy. And I wouldn't buy British Gas if it were a stand-alone stock.
Your opinion on BT
I spent much of 2024 running the rule on BT Group before deciding not to buy it. ChatGPT seemed to share my skepticism. He pointed to numerous challenges for the expanding telecoms giant, namely fierce competition, high debt due to heavy investments in Openreach and 5G broadband, huge pension obligations and missteps such as its expensive BT Sport venture.
That said, BT has largely completed its investment in Openreach, so the rewards could be coming soon. It has also eased concerns about BT Sport by selling a majority stake to Warner Bros..
However, declining revenues in traditional areas such as fixed line services remain a cause for concern. ChatGPT accurately described BT as a “Classic case of a company trying to modernize while facing legacy problems”with long-term rewards that require “short-term pain”.
Despite these problems, BT shares rose 22% last year. They're also trading cheaply at 7.6 times earnings with a tempting 5.7% dividend yield.
Centria and BT Group seem a bit of a mess to me. Too many fingers in different pies. I have considered purchasing them, but ultimately decided to aim for cleaner, more efficient and simpler companies. If I owned these shares, I wouldn't sell them in a heartbeat. But I'm not in a hurry to buy them either.
