Here’s why I’m expecting big things from my Stocks and Shares ISA in 2025!

As we approach the end of 2024, I’ve been reviewing the largest holdings in my Stocks and Shares ISA. I want to make sure that I’m comfortable with my positions as we enter the new year.

My five biggest holdings are FTSE 100 shares. Generally, they tend to deliver fewer surprises, resulting in more stable shares prices. Of course, there are never any guarantees but, on balance, I believe investing in the Footsie carries less risk.

That’s why my ISA is heavily weighted towards some of the UK’s largest companies.

Bigger and better?

In terms of market cap, my biggest is Rolls-Royce Holdings.

Lots has been written about the post-pandemic meteoric rise in its share price — I admit the company’s shares are no longer cheap. And I think its dividend is disappointing.

However, the group continues to deliver impressive earnings growth, which I expect to continue as I think its factory-built nuclear reactor business will do particularly well.

Rolls-Royce is a quality company with an excellent reputation. That’s why I think it deserves a place in my ISA.

Laughing all the way to the bank

Of the Footsie’s banks, I own Barclays (LSE:BARC) as I think it’s the most undervalued. It has a lower price-to-book ratio than its peers.

But banking can be risky. Bad debts could rise if economic conditions deteriorate. And Barclays’ interest margin will be squeezed if the cost of borrowing (as expected) falls in 2025.

However, the bank has ambitious growth plans. It aims to deliver a return on tangible equity of 12% (2023: 10.6%) by 2026. With tangible equity of £50.4bn at 30 September 2024, a small percentage increase will have a big impact.

And from 2024 to 2026, it seeks to return £10bn of capital to shareholders. That’s over a quarter of its current stock market valuation. For these reasons, I’m expecting Barclays’ recent good run to continue.

Solid building blocks

In my opinion, Persimmon’s fortunes are entirely dependent upon a recovery in the housing market.

Although the government wants to build more homes, I think there’s little point if the demand isn’t there. And the housebuilder recently warned of construction cost inflation picking up again.

But with interest rates expected to fall and the OECD upgrading its 2025 UK GDP growth prediction to 1.7%, I’m hopeful that confidence will return soon to the housing sector.

Shopping around

Having two retailers — JD Sports Fashion and Next — in my top five goes against the well-founded principle of having a diversified portfolio. Although in my defence, I’d point out that they operate in different sectors.

I acknowledge that fashion is a tough business. Keeping up to date with rapidly changing tastes is difficult. And I believe the threat of ‘fast fashion’ rivals cannot be underestimated.

However, both have a strong track record of growth. Since the start of 2023, Next has issued nine separate profits upgrades. Its forward price-to-earnings (P/E) ratio is currently 15.5, compared to a 2020-2024 average of 17.3.

The profit before tax of JD Sports grew 139% from 2019-2024. Based on analysts’ expectations, its forward PE ratio is just 7.5. It hasn’t been this low for at least 10 years.

That’s why I’m optimistic that both stocks — along with the others in my Stocks and Shares ISA — will perform strongly in 2025.

The post Here’s why I’m expecting big things from my Stocks and Shares ISA in 2025! appeared first on The Motley Fool UK.

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James Beard has positions in Barclays Plc, JD Sports Fashion, Next Plc, Persimmon Plc, and Rolls-Royce Plc. The Motley Fool UK has recommended Barclays Plc and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.