Most-bought investments: January 2022

Investors snap up Tesla, buy banks on creeping interest rates, and stick to their knitting on funds and investment trusts.

Despite a turbulent start to markets in 2022, investors are not yet ditching big technology plays, according to January best buys data from interactive investor, the UK’s second largest DIY investment platform.

In what is being bravely dubbed as the ‘Great Rotation’ in markets (only time will tell), January saw a shift from growth stock outperformance, which are often seen as more speculative, to more traditional value plays. This made the month a difficult one for investors to navigate.

But that hasn’t deterred many ii customers, with Tesla the fourth most bought direct equity in January, behind Lloyds, BP, and Unilever.

Tech funds and investment trusts again made it into the top 10 best buys, with L&G Global Tech Index Trust the third most bought fund and Allianz Technology and Polar Capital Technology in fourth and 10th position in the investment trust charts. Scottish Mortgage, meanwhile, kept its long-held number one spot.

It’s not just interactive investor customers who are sticking by their technology picks.In an interactive investor podcast interview,published today, Nick Train, co-founder of Lindsell Train Limited, explained that he was “trying to take advantage of that sell-off” and he believes that we are still at  “…a relatively early stage in a reshaping of global stock market…towards digital businesses.”

Commenting on ii’s January direct equity best buys, Keith Bowman, equity analyst, interactive investor, says: “Despite reporting record quarterly earnings that beat Wall Street forecasts, shares for electric car maker Tesla fell by around 11% in January. Many investors choose to look past its cautionary comments regarding supply chain issues bugging the company throughout 2022, instead focusing on clear consumer demand for its cars and other ventures such as the development of full self-driving capabilities and even a prototype humanoid robot.

“Consumer goods giant Unilever moved into the spotlight as its failed bid for GSK’s consumer business saw investors following the lead of activist investor Trian Partners in taking or adding to existing shareholdings.  

“Geopolitical tensions surrounding Ukraine helped generate a 15% or so gain in the oil price over the month, generating renewed investor interest in oil giant BP. Its shares gained by a similar amount.

“Elsewhere, prospects for higher UK interest rates sharpened focus in bank stocks Lloyds and Barclays. A series of expected interest rate rises during 2022 should help banks widened margins between deposit and lending rates, potentially expanding future profitability. Shares for each rose by around 6% during January.”

Victoria Scholar, Head of Investment, adds: “What’s intriguing in the month of January is a more optimistic outlook for the long-unloved UK. FTSE 100 companies have fallen back into favour lately, thanks to attractive valuations after years of underperformance since Brexit, spurring a revival in demand from domestic and international investors.”

Direct Equities in detail

December’s most bought equity pick, Boohoo, slipped down to 6th this month, as new entrants such as Unilever stole the spotlight with investors. 

The top selling equity across interactive investor in January was Lloyds Banking, closely followed by BP in 2ndplace. Within the top three was a new entrant, Unilever, which came in at 3rd.

Other new entrants include another financial pick – Barclays, which was the 9th most bought equity in January. Followed by Vodafone,which was 10th.

Tesla remained a popular choice, despite market wobbles – retaining its place in the top 5.

Victoria Scholar says: “Having shed more than 20% in the final two months of the year, British Airway’s parent company, International Consolidated Airlines Group, saw investors sweep up its shares at the start of January. As it transpired that Omicron would perhaps be less severe than initially feared, sparking a renewed optimism towards summer holidays.”

Investment trusts and funds in detail

On the investment trust side, January saw a mix of technology trusts, capital preservation, and allocations to precious metals.

Scottish Mortgage once again took the top spot in January, ahead of Smithson in second position – the same as the month before. However, a new trust entered January’s top three – Edinburgh Worldwide. This is another strong indicator that retail investors are not shunning growth stocks just yet, as the trust, managed by Baillie Gifford, invests in entrepreneurial early-stage growth companies. Allianz Technology was fourth, again demonstrating investor confidence in the sector’s resilience.

It was a busy month for new entrants into the trusts top 10 in January. Private equity trust Harbourvest came in at number 6. Followed by fellow newcomers – Baillie Gifford US, and Blackrock World Mining, in 7th and 8th respectively.

On the funds front, the top three in the month of January are again led by the popular Fundsmith Equity fund, which prioritises investment in high-quality companies. Vanguard’s LifeStrategy 80% Equity is next, in 2nd place, followed by Legal & General’s Global Technology Index Trust in 3rd.

Commenting on January’s most bought funds and trusts, Kyle Caldwell, Collectives Specialist, interactive investor, says: “The familiar names continue to dominate the funds and investment trust tables: Vanguard, Fundsmith, and Baillie Gifford. Investors also seem undeterred from the tech sell-off, still picking up a couple of specialist trusts and funds, and keeping Scottish Mortgage in the top spot in investment trust land. One new entrant stands out in January, BlackRock World Mining Investment Trust. With its focus on mining and metal securities, it could be seen as an inflation hedge, moving to a small premium over the last month along the way.

“Some of interactive investor’s customers have been bargain-hunting, with two Baillie Gifford  growth-focused trusts climbing up our top 10 table in January. Moving seven places up the table was Edinburgh Worldwide. The trust, which is managed by Douglas Brodie and invests in global smaller companies, has seen its performance go from hero to zero since the start of 2021. In 2020, the trust was one of the best-performing trusts of the year, with a share price total return of 87.7%. However, its one-year return is now showing a very sizeable loss of -40.6%.”

“Edinburgh Worldwide seeks to identify tomorrow’s winners by backing small entrepreneurial companies, typically with a market capitalisation of less than $5 billion when it first makes an investment. The trust’s style has fallen out of favour, due to investors moving away from high-growth businesses that have performed well during the pandemic.

“However, its approach has over long time periods has paid off, even having given back some of its performance over the past year. Five-year returns show a gain of 120%.

“As a result of its short-term performance woes, the trust has moved to trade on a sizeable discount.”

“Customers of interactive investor also remain positive, with Scottish Mortgage remaining the most-popular trust in January. It has consistently occupied the top spot since June 2019. The percentage buy/sell ratio in January was 67% vs 33%. The trust is currently trading on a discount of 1.7%, slightly higher than its 12-month average discount figure of 1%. At various points in January the discount was higher than its current level, and some investors snapped up the trust.”

Top 10 most bought investments on interactive investor in January 2022