Most-bought investments: February 2023

Investors go big on banks and favour global funds and dividend-paying trusts.

• Fundsmith Equity remains the only active pick in the top most-bought funds, with investors choosing investment trusts to ‘go active’ – with an income focus
• Two new entrants for investment trusts in February: The Renewables Infrastructure Group and Alliance Trust
• Tesla knocked off the top spot by Lloyds

interactive investor, the UK’s second-largest investment platform for private investors, outlines the most-bought investments on its platform in February 2023.

February marked a landmark moment for the FTSE 100 – surpassing 8,000 points for the first time. While FTSE 100 heavyweight stocks continue to capture attention from stock-pickers, the home market is still out of favour for fund investors, with only one UK fund pick making the top 10, Fidelity Index UK.

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Global markets have been picking amid hopes that the rate-hike cycle was finally coming to a close. But they remain uncertain, and against this backdrop, investors continue to favour passives over active funds.Fundsmith Equity, once again, was the only poster child for active management in February, having been one of only three active funds in December’s best buys, and the only one in January.

That said, investment trusts are the ultimate active vehicle, by virtue of there being no passive funds, and remain popular with interactive investor customers.

Vanguard is the most dominant fund house with six funds in the top 10 in February. Little has changed in terms of rankings since the prior month – but Vanguard FTSE UK Equity fell out of the top 10 this month.

Some of the oldest, largest and best loved investment trusts hog the top three: Scottish Mortgage (LSE:SMT), F&C Investment Trust (LSE:FCIT)and City of London (LSE:CTY). Half of the top 10 investment trust purchases reflect a demand for income, with City of London (LSE:CTY), Greencoat UK Wind (LSE:UKW), Renewables Infrastructure Group (LSE:TRIG), Murray International (LSE:MYI)and Merchants Trust (LSE:MRCH)all income plays.

Direct equities in detail

In February, investors went big on banks. UK banks, which have traditionally done well from rising rates, have been reporting in February. Lloyds Banking Group (LSE:LLOY), a FTSE heavyweight, comes in at number one on ii’s list in February, and is joined by a number of other banking names such as Barclays (LSE:BARC)(at number four) and NatWest (LSE:NWG)(at number seven).

Glencore (LSE:GLEN) held firm at number two, and Tesla (NASDAQ:TSLA) – the most popular stock in January, dropped to number three on the list in February.

Keith Bowman, Investment Analyst at interactive investor, added: “Above forecast results and a drive by the aero engine maker’s new CEO to increase efficiency underpinned a more than one third (37%) increase in Rolls-Royce Holdings (LSE:RR.) shares over the month. That led FTSE 100 company gainers during February. Investors have been monitoring Rolls Royce shares for a hoped-for recovery from the pandemic for some time now.

“Latest results from BP (LSE:BP.) appeared to see the financial pain from the pandemic now placed firmly behind it. BP during the February joined the throng of oil majors reporting bumper annual profits, helping its shares to a near 13% gain over the month. A dividend yield of over 3.5% now offers attraction.

“Shares for FTSE 100 miner Glencore sank by close to 9% during February. Buoyant annual 2022 results, helped by its expose to coal as nations attempted to find alternatives to Russian oil, failed to counter its reduction in shareholder returns given the still highly uncertain economic outlook. Investors continue to favour its diverse business model including both mining and a trading division, along with exposure to battery related metals. 

“A newly acquired shareholding by Liberty Global and rumours that Vodafone Group (LSE:VOD) was considering a sale of its African business Vodacom helped its shares rally 7% in February. A dividend yield of over 7% remains attractive to income orientated investors. 

“Dividend yields of over 4% for Lloyds, Barclays, and NatWest continued to leave the sector under the spotlight. Poorly received annual results from both Barclays and NatWest, pushing their shares 6% and 5% lower respectively during February offered investors potential buying opportunities.

“Momentum in shares of electric vehicle maker Tesla carried on through to February following a highly buoyant January. Record early year order demand following announced vehicle price cuts in December helped set the ball rolling, pushing its shares up 40% in January and 19% in February. That follows a 65% fall during 2022. The Nasdaq listed stock remains closely watched by retail investors.”

Funds and investment trusts in detail

Commenting on the most bought funds and trusts on ii during the month of January, Kyle Caldwell, Collectives Specialist, interactive investor, says: “February was a month that saw the FTSE 100 index surpass 8,000 points for the first time, and the consensus view is that UK shares remain good value versus history.

“For contrarian investors, bargain opportunities are particularly prevalent amongst the mid and small-cap parts of the market, which have notably sold-off due to stagnant economic growth, high inflation, and increases in interest rates. Some fund managers argue share price falls over the past year or so for more domestically-facing UK businesses have been overdone, and priced in the prospect of a shallow recession.

“However, fund and investment trust investors continue to give their home market the cold shoulder. In February, this was further evident as one passive UK funds exited the top 10 most-bought funds: Vanguard FTSE UK Equity Income Index.

“City of London, which has been managed by Job Curtis since 1991, predominately invests in dividend-paying FTSE 100 firms. Curtis adopts a conservative approach in focusing on companies with good cash generation.  It has raised its dividends for 56 years in a row – a high level of consistency.

“Greencoat UK Wind, the renewable infrastructure investment trust, aims to provide investors with a yearly dividend that increases in line with RPI inflation. This aim has been successfully achieved each year since the trust launched in 2013. In its recently published annual results the trust said it was confident that its RPI target would be achieved once again in 2023. It has a yield of 5.6%.

“Merchants Trust has as a higher yield than peers, at 4.6%. It aims to deliver an above-average level of income and income growth, as well as long-term growth of capital, through investing mainly in higher-yielding large UK companies.

“Fidelity Index UK tracks the performance of the FTSE All-Share index. Yearly ongoing charges are low, at 0.06%.

“The two new entrants for investment trusts in February are The Renewables Infrastructure Group and Alliance Trust (LSE:ATST). Both have been in and out of our top 10 over the past year.

“As well as investors looking to ensure their money is invested in businesses ‘doing good’ in some form or other, the high yields on offer amongst renewable energy investment trusts is a key attraction, particularly at time when inflation is at its high levels in decades and investors are hungry for income. The Renewables Infrastructure Group has a yield of 5.7%.

“Alliance Trust offers a one-stop-shop to investors as it invests globally in other funds. It selects managers with a balance of investment styles, which means Alliance Trust effectively takes style risk off the table.

“Another one-stop-shop option is F&C Investment Trust, which was the second most-bought trust in February. The trust’s manager, Paul Niven of BMO Global Asset Management, oversees the strategic and tactical asset allocation. He selects managers to run various strategies, which are predominantly within BMO. The trust has exposure to unlisted and private equity, which differentiates it from peers.”

Top 10 most-bought investments on interactive investor in February 2023