I asked ChatGPT to name 2 cheap stocks to beat FTSE in 2025. Its first choice surprised me

I hunt for cheap stocks and am happy to get help wherever I can, even if that means driving robots. So I asked the AI ​​chatbot ChatGPT for its ideas.

Yes, I know it doesn’t really have an idea. It just pulls information out of the internet. Although in that it is not so different for the rest of us.

I didn’t see the first stock option coming. I thought it would pick a few FTSE 100 companies that went under in 2024 and were not cheap as a result. Instead, it appeared Barclays (LSE: BARC). It has been one of the best performers, with shares up 80% over the past year.

Stocks are not as cheap as the bot thinks

This highlights the dangers of relying on ChatGPT. It removed its recommendation from Barclays’s price-to-earnings (P/E) ratio for 2023, which was a low of 5.1. After the recent surgery, it is now up to 9.5. Investors beware.

However, that is still comfortably below the FTSE 100 P/E ratio of around 15 times. And Barclays currently has a low price-to-book ratio of just 0.5. That’s half the figure of 1 that is seen as a fair value.

It also boasts a diversified income portfolio between retail and investment banking, including exposure to the booming US market. “This provides some resilience against sector-specific downturns”, ChatGPT tells me.

It actually quotes a Motley Fool subject there. The elder. Some of ChatGPT’s ‘information’ is wrong about the regulated financial services industry and competition. So what do I think?

Barclays is a smart buy and hold for the long term. But after its strong performance I don’t think this is the time to buy. The yield is now down to 3%. Hold me Lloyds Banking Group their shares are up ‘just’ 20% in the past year. But with a P/E of 7.1 and a forward yield of 6%, I think it’s a better pick. I’m only human, and I can be wrong.

ChatGPT’s second stock option is cheap by anyone’s standards, the oil giant BP (LSE:BP). It is so cheap that I bought its shares on January 14th at a P/E of only 5.9 times.

I have decided that BP is a no-fault benefit

BP’s share price has been highly volatile in recent years, mainly down to oil price movements. It took off after Vladimir Putin invaded Ukraine in 2022, a power shock began, then subsided as the West gained more power.

Today, Brent crude is above $80 a barrel following the Biden administration’s 11th hour sanctions on Russia, chilly temperatures across the Atlantic and fears of inflation.

Markets are looking forward to President-elect Donald Trump. He wants the US to get drilling, which should increase supply. However Goldman Sachs has warned tougher sanctions on Iran could send Brent to $90. And we all wonder what OPEC+ might do next.

I look beyond the short-term noise – particularly volatility in the energy sector – and treat BP as a buy-and-forget long-term stock. Now it looks like a good entry point. Especially with that bumper 5.3% sequential yield and potential share buyback.

ChatGPT also appreciates that “BP must navigate the challenges of energy sector reform and commodity market volatility”and that’s a fair point.