Most-bought investments: August 2022

‘Oldies but goodies’ return to favour in tough times as F&C investment trust catapults back into the top 10 for the first time since the dark days of the pandemic.

• Investors also continue to opt for defensive picks and wealth preservation strategies

August has seen a flurry of second-quarter earnings from UK banks, share buybacks, and yet more recession fears – particularly in the US – giving investors a range of things to consider from an investment perspective.

interactive investor, the UK’s second-largest direct to consumer investment platform, outlines the most-bought stocks on its platform during the month of August.

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The year to date has seen investment trusts with a capital preservation theme tending to dominate the best buys, not to mention an element of inflation protection. August was no different, with Personal Assets (LSE:PNL), Capital Gearing (LSE:CGT) andii Super 60-rated Capital Gearing (LSE:CGT) all featuring.

But August also saw the return of interactive investor Super 60 rated F&C Investment Trust (LSE:FCIT) to the top 10 best buys for the first time since March 2020 and April 2020.

This came, of course, ahead of F&C’s impending promotion to the FTSE 100 after a 13-year absence, but the timing is also notable for other reasons.

Historically, investors have tended to flock to some of Britain’s oldest investment trusts in times of uncertainty. F&C Investment Trust has weathered the Great Depression, world wars, the 1970s' inflation crisis, tech booms and busts, and is still going strong. This could well be resonating with investors in the current climate, as it did in early 2020.

Other interesting entrants in August from the investment trust sector came from sectors which could be seen by some to have potentially recession-resilient qualities. Renewables Infrastructure Group (LSE:TRIG) was the eighth most-bought trust in August, while Ecofin Global Utilities & Infrastructure (LSE:EGL) was ninth.

Direct equities in detail

FTSE 100 heavyweights like BP (LSE:BP.), Lloyds (LSE:LLOY), Glencore (LSE:GLEN), and Rolls-Royce Holdings (LSE:RR.) remained some of the most-bought stocks on the interactive investor platform in August. However, there was a shake-up in demand for insurers, with Legal & General (LSE:LGEN) joining the list of most-popular stocks and Aviva (LSE:AV.) and Direct Line (LSE:DLG) dropping out.

August’s equity newcomer was Revolution Beauty Group (LSE:REVB), which has made headlines in recent weeks due to a high-profile audit failure.

Commenting on August’s most-bought equities in more depth, Victoria Scholar, Head of Investment, interactive investor, says: “Following a disappointing stock market debut in July, Haleon (LSE:HLN), GSK’s consumer health spin off, alongside GSK (LSE:GSK) itself both joined the list of best buys in August. The two companies have struggled over the last month, but some investors may have used this as an opportunity to pick up these stocks more cheaply, making the most of their double-digit percentage declines across August.

“Tesla Inc (NASDAQ:TSLA) is back in the most-bought list; a company that frequently finds itself among the list of most-popular stocks for ii customers. Its 3-for-1 stock split slashed its share price by a third in August, widening access to a greater pool of retail investors who can now purchase each share for less than $300. More broadly, Tesla remains popular thanks to its place at the centre of the shift towards climate-friendly technologies.

“Cineworld Group (LSE:CINE) shares collapsed after confirming it is considering bankruptcy, prompting a flurry of trading activity in the stock, both buying and selling, with investors taking a view either that the fundamentals suggest the stock is no longer worth holding or that it is extremely cheap and therefore worth buying.  

“Similarly, the woes facing Revolution Beautyhave prompted investors to buy and sell the stock. Shares have collapsed since its stock market debut in July 2021, with shares now set to be suspended in September, after accounting issues were highlighted by its auditors.”

Keith Bowman, Senior Investment Analyst, interactive investor, adds: “BP (LSE:BP.) renewed its focus on shareholder returns, and buoyant cash flows aided by elevated energy prices helped it announce a new $3.5 billion share buyback during August along with a 10% hike to the dividend payment.

“Legal & General (LSE:LGEN) remained under the spotlight of income investors as it upped its interim dividend by 5% and detailed broadly inline first-half results.

“Miner and commodities trader Glencore (LSE:GLEN)added to its investor appeal as it detailed new shareholder returns alongside its first-half results. This included a new $3 billion share buyback plan.

“Weaker-than-expected earnings from Rolls-Royce Holdings (LSE:RR.) more than offset encouragement from a big reduction in the engine giant’s cash burn. A near 14% retreat in its share price over the month left investors further assessing prospects.

“A difficult month for both GSK (LSE:GSK) and Haleon (LSE:HLN) left both in the sights of investors. Growing concerns regarding potential U.S. litigation in relation to a heartburn drug of the former combined company and a possible link to cancer overshadowed. GSK continues to highlight that the overwhelming weight of scientific evidence points to no increased cancer risk associated with the drug.”

Market malaise rumbles on

Giving the broader market context, Richard Hunter, Head of Markets, interactive investor, said: Investors have had to grapple with the likelihood of higher interest rates for longer than had been hoped.

“As investors continued to seek refuge in haven assets, equities were rerated again as the impact of inflation and higher rates increasingly erode the outlook for corporate profits against this challenging backdrop. Indeed, even though a couple of recent data points have given a glimmer of hope that inflation may be peaking, a continued and measurable trend of similar readings will be required before the Fed considers a change of direction.

“As such, the high volatility and economic uncertainty which has brought any summer recovery to a halt as investors ponder the alternatives could well continue.”

Funds and investment trusts in detail

Kyle Caldwell, Collectives Specialist at interactive investor, explains: “Following the summer rally for stock markets, the question going forward is whether this is the start of better times for investors or just a classic bear market rally that will run out of steam.

“Investors at interactive investor are not get carried away, as reflected by the three new entrants in August to the top 10 table of the most-bought investment trusts on ii.

“The first two newcomers invest in defensive areas: infrastructure and utilities. Both sectors have predictable long-term cash flows, and therefore recession-resilient qualities. Renewables Infrastructure Group (LSE:TRIG) was the eighth most-bought trust in August, while Ecofin Global Utilities & Infrastructure (LSE:EGL) was ninth.

The third new entry to the top 10 table is Britain’s oldest investment trust - F&C Investment Trust (LSE:FCIT) – which will shortly return to the FTSE 100 index after a 13-year absence.

“F&C is a global multi-manager trust that offers a one-stop shop for investing. It is managed in a conservative manner, reflected by the portfolio being highly diversified, with around 400 holdings. This diversification, and the fact that it is a consistent income payer having increased dividends for 51 consecutive years, makes the trust a potential core holding for investors.

“Most of the other seven trusts in the top 10 are also conservatively managed or invest in defensive assets. Three wealth preservation trusts remain in the top 10: Personal Assets (LSE:PNL), Capital Gearing (LSE:CGT) and Ruffer (LSE:RICA).

“Another conservatively managed trust in our top 10 – in second place – is City of London (LSE:CTY) investment trust. The trust, which mainly invests in FTSE 100 dividend-paying shares, has raised its dividend for 56 consecutive years. Its dividend yield is 4.9%.

“In funds land, the top 10 is virtually unchanged from last month, with six of the top 10 passive funds. This could reflect that some investors have lost faith in active fund managers’ ability to add value when stock markets are volatile. Instead, those investors are preferring passive funds to simply accept the market return minus fees rather than pay higher fees for an active fund manager, who may outperform but may also underperform.

“Interestingly, the one new addition to our top 10 funds in August bucked the cautious trend – Fidelity Global Technology. Given that tech shares have been out of favour so far in 2022 in response to the tightening in monetary policy, investors buying today will be hoping for a change in fortunes.”

Top 10 most-bought investments on interactive investor in July 2022