Most-bought investments: January 2023

Almost a clean sheet for passive funds, while active investors seek out investment trust bargains.

• Fundsmith Equity remains top fund pick among ii customers, and the only active strategy in the top 10
• Four new entries to the top 10 investment trust picks: Fidelity China Special Situations, HgCapital, Murray International, andMerchants
• Tesla retains its top spot after a challenging year

interactive investor, the UK’s second-largest investment platform for private investors, outlines the most-bought stocks on its platform during January 2023.  

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Despite a strong start to the year, fund investors turned to passives. Fundsmith Equity was the only poster child for active management in January, having been one of only three active funds in December’s best buys.

Vanguard accounted for seven of the top 10 fund buys, the highest number of Vanguard funds in the best buys that interactive investor can recall.

Yet investors did embrace active management, and some adventurous themes, using investment trusts. Sectors such as China, Private Equity, Commodities and Natural Resources, Infrastructure, Flexible Investment and Global theses all featured.

Direct equities in detail

Among the most-bought equities during January, FTSE 100 heavyweights such Glencore (LSE:GLEN)and Lloyds Banking Group (LSE:LLOY), dominate once again.

EV giantTesla Inc (NASDAQ:TSLA), which has been moving up a place month-on-month, has grasped the top spot in January.

Those who have left the top 10 in January include: BP (LSE:BP.), Boohoo Group (LSE:BOO), Amazon.com Inc (NASDAQ:AMZN), andPantheon Resources (LSE:PANR).

New entrants for January include Argo Blockchain (LSE:ARB), GSK (LSE:GSK), easyJet (LSE:EZJ), and Direct Line Insurance Group (LSE:DLG).

Commenting, Victoria Scholar, Head of Investment, interactive investor, says: “FTSE 100 names such as Vodafone Group (LSE:VOD), Lloyds, Glencore and Rolls-Royce Holdings (LSE:RR.) retained their spots on interactive investor’s most-bought list of stocks in January, as investors continue to lean towards the UK large-caps.

“Tesla, which suffered a painful slide in 2022, caught up in the broader sell-off in big tech has also kept its place on the list of most popular stocks on the platform. Brave investors who continued to purchase the stock in January saw that risk pay off as the stock sky-rocketed in January, partly thanks to its forecast topping earnings report. However, Amazon dropped out of the list after last year’s painful declines as well as job cuts and industrial action at the e-commerce giant last month.

“EasyJet was a new addition to the top 10 in January, with its bullishness out of the gates in 2023 attracting investors back to the stock. The low-cost carrier enjoyed a flying start to the year, reversing some of 2022’s declines as first quarter earnings saw a strong rebound in revenues thanks to its low-cost appeal.

“UK pharma giant GSK is another new addition to the list of most popular stocks, as investors turn to more defensive plays as a means to weather the macroeconomic headwinds.

“Insurers proved to be popular among ii customers in January with Legal & General (LSE:LGEN) and Direct Line making it onto the top 10 list, despite underperforming wider markets.

“Investors have been buying Argo Blockchain as a proxy place on the cryptocurrency market’s rebound. Bitcoin has seen an impressive bounce back in January, helping Argo Blockchain surge year-to-date. The cryptocurrency miner’s stock price also enjoyed a tailwind after regaining its listing on the Nasdaq stock exchange.

“Despite rebounding in January, Boohoo has dropped out of interactive investor’s list of best buys, amid cautiousness from investors after a rocky year in 2022.

“In the oil and gas sector, Pantheon Resources and BP also fell out of the most popular list of stocks as last year’s commodity price boom eases.”

Funds and investment trusts in detail

Fundsmith Equity remained the most-bought fund in January and was the top open-ended fund pick for the entirety of last year.

Commenting on the most-bought funds and trusts on ii during the month of January, Kyle Caldwell, Collectives Specialist, interactive investor, says: “Fund investors are continuing to shy away from actively managed strategies, with just Fundsmith Equity in our top 10 most-bought funds in January. In December, there were two new active fund entrants, which have swiftly departed in January: Royal London Short Term Money Mkt and wealth preservation strategy CG Real Return.

“Passive funds are proving more popular in the top 10, with investors mainly preferring to gain exposure to developed markets. Lower costs, with some index funds charging less than 0.1% a year versus typically around 0.9% for an active fund, is a key attraction.

“Simplicity, however, is another, with some investors favouring the certainty offered by a passive fund that it will do what it says on the tin – seeking to track the market return minus its fee.

“Whereas, with active funds investors are buying in the hope the manager outperforms the index. With 2022 fresh in the memory – a year that saw most active funds post losses – some investors are deciding to steer clear.

“In contrast, we saw in January customers on the lookout for investment trust opportunities. There were four new entries to the top 10: Fidelity China Special Situations (LSE:FCSS), HgCapital Trust (LSE:HGT), Murray International (LSE:MYI) and Merchants Trust  (LSE:MRCH).

“In the case of Fidelity China Special Situations and HgCapital, investors are perhaps attempting to ‘buy low’ in the hope of an improvement in fortunes in 2023 and beyond. Fidelity China Special Situations, a member of interactive investor’s Super 60 investment ideas, has faced a number of macroeconomic headwinds over the past 18 months or so, but now looks potentially like the start of a more favourable backdrop following the relaxing of China’s zero-Covid policy. Time will tell.

“Dale Nicholls has managed the trust since April 2014. It aims to identify companies - across both public and private markets - that are best placed to benefit from a growing middle class and the shift towards a more consumption-driven economy.

“HG Capital, in common with other private equity focused trusts, has seen its share price come under pressure and its discount widen due to concerns among investors that falls in listed markets are putting downward pressure on valuations for unlisted companies.

“The predicament that investors face is that net asset values (NAVs) are reported quarterly by private equity trusts, resulting in a timing lag on when the valuations are reported.

Therefore, those NAVs potentially do not reflect the reality of what those assets could be sold for today. However, those who think too much bad news has been priced in can take advantage of discounts widening over the past year.”

Investors are still hunting for income

Caldwell adds: “The other two new entrants to the top 10 investment trust list reflect that investors remain on the hunt for income.

“Murray International, another member of interactive investor’s Super 60, has a 4.2% yield, which is higher than most rivals. The global equity income trust, managed by Bruce Stout, has been a beneficiary of the change in macroeconomic conditions, which has resulted in sentiment shifting away from high-growth strategies. It has a value focus, and a bias towards Asia and emerging markets.

“The fourth new entrant, Merchants Trust, also has a higher yield than peers, at 4.6%.

It aims to deliver an above-average level of income and income growth, as well long-term growth of capital, through investing mainly in higher-yielding large UK companies.”

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