Four giants of industry were created in the same year as the ISA launched in 1999 and investing in them at the first possible opportunity via this tax wrapper would have turned £5,000 in each stock into a combined £648,660, according to analysis by AJ Bell.
All capital gains and income have been sheltered from the taxman in this scenario, meaning investors lucky enough to hold these stocks would have been able to keep all the rewards.
Three of these companies were the product of mergers and today are among the most significant players in their respective industries. One might think these businesses have been around for decades given their large market positions and multi-billion-pound or dollar valuations, yet the corporate world is ever-changing and it’s interesting to note they are only 25 years old in their current form.
The companies include pharmaceutical group AstraZeneca, defence giant BAE Systems and oil producer ExxonMobil and investors were able to buy their shares immediately at the point of their creation in 1999. The quartet is rounded off with Salesforce, which was founded just two months before the ISA was first launched but which didn’t list on a stock market until June 2004.
Investing in these four stocks on the day they were created, or from IPO in the case of Salesforce, would have been a savvy move as they’ve subsequently delivered stellar returns. All four have outperformed the UK and US markets, as measured by the FTSE 100 and S&P 500 respectively and based on total returns (share price gains/losses and dividends).
AstraZeneca
Total return: 744% (since business was created on 6 April 1999)
AstraZeneca shares a birthday with the ISA – both were officially created on 6 April 1999. British group Zeneca was spun out of chemicals group ICI in 1993 and merged with Swedish group Astra six years later to create the FTSE 100 company we know today.
Healthcare is big business as people are living for longer and the global population is growing. Demand is booming, yet the average investor doesn’t have a clue how to properly research the pharma and biotech space because the science is complicated. Instead, they either turn to funds for broad exposure or look at the biggest players in the industry to spot which ones have form in developing or acquiring certain treatments.
AstraZeneca has been incredibly successful over the years and that has made it an obvious choice for investors. Its achievements have translated into superior returns for those holding its shares.
While the science behind the treatments might only be understood by experts in the subject, AstraZeneca’s strategy is fairly simple to understand. It specialises in three areas: oncology (cancer), biopharmaceuticals (chronic diseases) and rare diseases. Money made from selling proven treatments is reinvested into developing the next generation of medicines, funding acquisitions and paying dividends to shareholders.
BAE Systems
Total return: 925% (since business was created on 30 November 1999)
BAE’s history can be traced back to Bristol and Colonial Aeroplane Company, one of the original names behind Concorde. Various mergers led to the creation of British Aerospace in 1977, an aircraft, munitions and defence systems manufacturer which in turn acquired Marconi Electronic Systems in 1999 to create BAE Systems.
For a long time, it was a favourite stock for income investors thanks to a generous dividend yield. Ongoing conflicts around the world and more sophisticated attempts by criminals to use technology to hack into government and corporate systems meant plenty of work for BAE, whose skills span defence, aerospace and cybersecurity.
The biggest share price catalyst for the company was Russia’s invasion of Ukraine in February 2022. Since then, BAE’s share price has more than doubled as governments around the world, shocked by the conflict, increased defence budgets and restocked military equipment. That’s led investors to believe that BAE’s earnings outlook has greatly improved.
ExxonMobil
Total return: 514% (since business was created on 30 November 1999)
Exxon and Mobil completed their merger in 1999 and today the enlarged entity is one of the world’s biggest companies by revenue. Its giant position in the oil and gas sector has made the shares popular with investors looking to play the energy space.
A lot of people have been sceptical that oil and gas demand will suddenly drop off a cliff as the world switches to renewable energy, but sticking with ExxonMobil shares has generated significant wealth for investors. This business churns out cash and shareholders have reaped the rewards.
ExxonMobil is heavily tied into the global economy. Its products drive modern transportation, power cities, help industry to tick over and provide building blocks that lead to thousands of consumer goods.
Salesforce
Total return: 7,022% (since business floated on 23 June 2004)
Twenty-five years ago, as the UK government prepared to launch the tax-efficient ISA savings and investment vehicle, Marc Benioff and three associates sat down in a rented one-bed apartment in San Francisco to develop an internet business to help automate tasks for companies.
No sooner had they gotten started, the dotcom crash happened. Undeterred, the Salesforce team pressed ahead and by the end of 2002 they had 70,000 users in 107 countries.
In 2004, Salesforce floated on the New York Stock Exchange and generated $176 million revenue that year. Fast forward to the present day and the company has just reported $34.9 billion annual revenue and declared 2023 to be ‘a phenomenal year’.
It’s been a fantastic share to own despite a few wild ups and downs and has certainly given great satisfaction to Benioff as he’s now a billionaire.
NOTES
AstraZeneca: created 6 April 1999 through a merger.
BAE Systems: created 30 November 1999 through a merger.
ExxonMobil: created 30 November 1999 through a merger.
Salesforce: founded in February 1999, joined stock market on 23 June 2004.
How we calculated the returns:
We looked at the total return for each stock, with the latest data taken on 26 March 2024. The total return figure accounts for changes in the share price and dividends paid.
AstraZeneca’s data runs from 6 April 1999 while BAE and ExxonMobil run from 30 November 1999, aligned to when the companies were created. Salesforce’s data runs from its IPO in June 2004.
We assumed £5,000 was originally invested in each of AstraZeneca and BAE, while the dollar equivalent of £5,000 was originally invested in each of ExxonMobil and Salesforce as both of their shares are denominated in US dollars, based on exchange rates at the time. We then converted the current dollar ExxonMobil and Salesforce investment values back into sterling, based off the 2 April 2024 exchange rate.
30 Nov 1999 exchange rate: £1=$1.5926
23 June 2004 exchange rate: £1=$1.8212
Source: LSEG/Refinitiv (total return data), Poundsterlinglive.com (FX rates)
Written by:
Dan Coatsworth
Dan Coatsworth is an Investment Analyst and Editor in Chief at AJ Bell. He has been with the company since December 2012 and has 19 years' experience in the industry, commenting on the markets and all things investing. He has a degree in Corporate Communications from Southampton Solent University.
Dan is heavily involved in the content published by AJ Bell, which includes providing market commentary, starring in our educational videos, writing for Shares Magazine and co-presenting our Money and Markets podcast, as well as hosting and presenting at events for customers – both in person and online.
Dan’s passion lies with educating customers all about investing and staying informed about market events. He previously worked for Teletext on the business and personal finance desks which taught him the importance of telling a story in as few words as possible. He has also contributed to Times Radio, LBC News, The Telegraph, Evening Standard, Mail on Sunday and The Week.
A fun fact Dan learned about investing early on was to not get caught up on the hype around certain stocks. He found this out himself when the first share he bought was a company trying to recover copper from a shipwreck at the bottom of the ocean… this sounded exciting but sadly didn’t make him any money! Outside of work, Dan enjoys swimming and live music.