FTSE 100 telecommunications giant Vodafone (LSE: VOD) was the most popular buy among Hargreaves Lansdown clients last week. Should I be filling my boots too? Here’s my take.

Why is Vodafone so popular?

Perhaps the most prominent reason for Vodafone’s sudden popularity is that it’s well-placed to benefit from the current rotation into value stocks. Interestingly, pharma giant GlaxoSmithKline, power provider National Grid and Vodafone’s peer BT have also been in big demand.

With the possibility of interest rates rising faster than expected, I fully appreciate why some would seek to ride this (temporary) wave.

Let’s not forget that Vodafone is a favourite among dividend investors as well. A yield of 5.4% is clearly an awful lot better than I’d get from a typical cash savings account. It’s also very attractive, considering the rising cost of living. 

Can this momentum last?

As a Foolish investor, I’m not interested in owning stocks for only a few days before dumping them. I’ll leave that to the traders who are happy to trust their ability to time the market. I know this is something I simply can’t do. So, I’m asking whether Vodafone stock is good enough to earn a spot in my portfolio for years.

In some ways, I think it is. Due to the nature of what it does, Vodafone possesses defensive characteristics that many companies would envy. It’s the largest mobile and fixed network operator in Europe and owns a highly valuable brand. It also possesses the continent’s fastest-growing 5G network.

That’s encouraging given the global 5G services market is expected to achieve a compound annual growth rate of 46% between 2021 and 2028. 

One might also argue that we’re only at the beginning of this stock’s recovery. Vodafone’s share price may be close to its 52-week high, but it’s still not even back to pre-pandemic levels. 

Costly FTSE 100 business

Having said this, I’m also of the opinion that there are far better businesses to buy than Vodafone. 

Considering just how costly it can be to keep its infrastructure in good working order (and update it when required), returns on capital are unsurprisingly low. That’s problematic, considering the best stocks to own over the long term tend to be those that bring in a lot of cash relative to the investment required. Margins are also pretty slim in this line of work. 

Then there’s the price I’m being asked to pay. Sure, a valuation of 16 times earnings isn’t unreasonable. But nor is it screamingly cheap, considering the amount of debt carried by the company.

Despite highlighting its income credentials earlier, it’s important to note that Vodafone has a consistently inconsistent track record when it comes to hiking its annual dividend. Personally, I’d much rather cash returns were modest but growing every year. This is more indicative of a company in rude health.

My verdict

Having endured an awful 2021, recent activity suggests Vodafone could be in for a better 2022. I can most definitely see the appeal of buying now if I were concerned about the short-term global economic outlook.

As someone with time on my side however, I’m sticking to snapping up quality growth stocks and funds while they’re on sale. Just like Warren Buffett suggests.

The post Investors are piling into this FTSE 100 stock. Should I buy too? appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Which will reach £2 first, Lloyds or Vodafone shares?
• 3 value stocks under £3 to consider in June

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline, Hargreaves Lansdown, and Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The IAG (LSE: IAG) share price has lost momentum recently. In fact, the stock has dipped almost 15% in the last five trading days alone. Will next month’s update on trading (5 November) help arrest this downward pressure? I’m torn. 

IAG share price: reasons to be bullish

One reason for thinking the recent turbulence may prove temporary is the ongoing lifting of travel restrictions. The forthcoming reopening of US borders to European travellers, for example, is clearly a good thing for the British Airways owner. This could/should inspire more previously-reluctant travellers to return to the skies. And evidence of this, in the form of increased bookings, not to mention talk of the company returning to profitability sooner than thought, could see IAG fly next month. 

As a sign that confidence is returning to the industry, BA recently announced that it was now looking to recruit new cabin crew in advance of huge expected demand next summer. Although the actual number of vacancies wasn’t made public, union Unite has recently told the Financial Times that it expected up to 3,000 people to be rehired by the business.

Other things that may boost the IAG share price include more details on plans for British Airways to provide a short-haul service from Gatwick. Once shelved but now seemingly back on track, this strategy has the potential to allow the company to snag a piece of the low-cost pie from peers like easyJet and boost its industry clout.

On the other hand…

The above all sounds promising. However, I don’t think there’s a shortage of reasons to think the IAG share price could remain volatile in November.

I wonder, for instance, whether the aforementioned removal of restrictions may already be priced in. Indeed, this is the reason given by broker Berenberg for recently reducing its target for the IAG share price to 200p from 230p. Yes, this would still imply a near-30% upside based on where the stock is now. Nonetheless, it doesn’t exactly scream confidence.

In addition, there’s also chatter that heavily indebted IAG will soon need to tap the market for more cash. Such a move would dilute existing holders. That’s not something any prospective investor hovering over the ‘buy’ button wants to see on the runway.

Perhaps in expectation of this, IAG was the third most popular sell on share-dealing platform Hargreaves Lansdown last week. Interestingly, it didn’t appear on the list of 20 most popular buys.

A simple bout of profit-taking? Perhaps. After all, the IAG is still up almost 50% in 12 months. Then again, the recent rise in Covid-19 infection levels could be prompting some holders to re-evaluate the airline’s outlook. Any suggestion that the UK government may be about to reintroduce measures designed to restrict the spread could be taken very badly by the market. 

Better buy

Of course, knowing exactly where stocks will go next is near impossible. Moreover, it’s simply not Foolish to buy anything based solely on a few months of trading and news flow. As a long-term investor with finite funds, I need to be confident that the IAG share price is capable of delivering better returns than I’d get elsewhere for years.

As things stand, I’m still not convinced. With arguably better prospects (and a cracking dividend), I’d feel more comfortable parking cash in this FTSE 100 stock instead.

The post Where might the IAG share price go in November? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why are investors buying Helium One?

So why such interest? It’s a good question, particularly given the recent performance of the shares.

On 23 August, Helium One’s stock traded for just under 17p. By the end of play on 27 August (last Friday), the share price had tumbled to just over 9p. At one point during the week, the stock was down as low as 6p. That’s only marginally above what Helium One’s shares traded at when they first arrived on the market at the end of 2020. 

As is often the case with junior stocks in this sector, with the collapse in price often attributed to a disappointing exploration update. My Foolish colleague Roland Head covered the less-than-ideal news on the firm’s Rukwa project last Thursday. 

A fall of 46% in such a short space of time is sobering. So is there anything that attracts me to Helium One shares? Actually, yes.

In short supply

Right now, helium supplies are running low. Yes, that means fewer birthday balloons. However, a far more important use of the element is for cooling magnetic resonance imaging (MRI) machines. These use radio waves and magnetic fields to create internal images of body parts. Through this, medical staff are able to diagnose and monitor conditions. This is clearly vital work. Moreover, the reduction in helium supply couldn’t come at a worse time given the delays caused by Covid-19.  

There’s another problem. Helium’s status as an inert gas means it’s also used in the manufacture of semiconductors, helping to prevent any unwanted chemical reactions. Unfortunately, the pandemic has accelerated a shortage of these chips which are now ubiquitous in everyday tech.

And these are just the near-term headwinds. Put it all together and the helium price should remain strong. This could leave HE1 in a sweet spot if it can find and extract enough gas. 

Dilution likely

Despite all this, it seems clear to me that the stock will likely remain a risky pick as drilling continues. All it takes is a bit of poor weather to halt progress.

On top of this, drilling campaigns are rarely cheap. HE1 has £10m in cash, at least according to management, but I suspect the need for more funding is pretty much nailed on. And capital raises would only serve to dilute any stake I owned.  

I also feel the need to question whether all this is, to borrow an expression from billionaire Warren Buffett, beyond “my circle of competence.” Do I possess sufficient knowledge of this (unprofitable) company to give me an edge over other investors?

If not, buying some Helium One shares today would be a speculative punt. That’s fine and it could pay off brilliantly. But it’s not investing.  

Better buy

Helium One has likely made some of its early owners wealthy. There’s a possibility it could still make great money for those investors buying in last week. For me however, there’s simply too much risk involved.

If I were to buy a penny stock, it would almost certainly be more of this one.  

The post Investors are buying Helium One Global (HE1) shares. Should I? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

There are some FTSE 100 stocks that regularly feature on the list of most popular buys on investment platform Hargreaves Lansdown. Battered engineer Rolls-Royce and under-pressure International Consolidated Airlines often fight it out for the top spot, for example. Lloyds Bank is also one of the most traded shares on the London market. Last week however, it was the turn of another top-tier member.

That company was telecommunications giant Vodafone (LSE: VOD).

Vodafone shares: what’s the draw?

Vodafone shares might be attracting buyers for a couple of reasons. For one, the blue-chip looks pretty reasonably valued, at least relative to other stocks in the FTSE 100. At last Friday’s close, the £33bn-cap was trading at 14 times forecast earnings. 

A potential second reason is the dividend stream on offer. Analysts currently have the company returning the equivalent of 7.66p per share for this financial year (ending 31 March). That gives a giant yield of 6.4%. For perspective, there are only eight companies in the FTSE 100 offering more. Those cash payouts look even more tempting when you consider that even the best instant access Cash ISA offers a paltry 0.65% in interest.

On top of this, Vodafone is clearly making progress at an operational level. Its tower division — Vantage Towers — has now been spun off and listed. More recently, the company reported a better-than-expected 3.3% increase in service revenue over Q1. 

Lagging the FTSE 100 

As popular as Vodafone is at the moment, there are a few things I’d need to be aware of if I were to queue for the shares. The first of these relates to how likely it is that those dividend payouts may need to be reduced. 

Right now, that huge yield is covered only 1.1 times by profits. Ideally, I’d be looking for this ratio to be higher (twice-covered would be ideal). In addition to this, Vodafone’s net debt has ballooned in recent years. That could prove problematic if/when interest rates rise. 

There’s also the lacklustre share price performance to consider. Vodafone’s stock is up only 2% in value over the last year. The FTSE 100 index has fared better — rising 18%.

The long-term picture isn’t encouraging either. Since 2016, Vodafone shares have halved in value! Meanwhile, the FTSE 100 is up 5% and the S&P 500 index has more than doubled. 

All this highlights an issue that investors face when deciding what to buy. I don’t just need to question whether the rewards are worth the risk. I also need to think about what gains I may be giving up by not being invested elsewhere.

On this note, it’s interesting that Vodafone didn’t feature on the list of most popular sells at Hargreaves Lansdown last week. Perhaps many of those buying now are in for the long term? Over such as short period of market activity, it’s impossible to know.

Stay diversified 

Despite its recent popularity, I suspect it’ll take time for the Vodafone share price to really get going. For this reason, I’d only consider joining other investors and buying this FTSE 100 stock today if I were looking to build a portfolio focused solely on generating income.

Considering the potential threats to the dividend, I’d also make sure I was sufficiently diversified to ensure that any damage from a cut, should one come, is limited.

The post This FTSE 100 dividend stock was last week’s most popular buy appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should I be adding this consumer goods behemoth to my shopping list too? 

FTSE 100 laggard

Based on recent performance, only contrarians need apply. Reckitt fell almost 12% in value over the previous trading week. All told, this meant that Reckitt’s shares had tumbled 30% since the end of July 2020. Contrast this with a 17% rise in the usually pedestrian FTSE 100.

At first glance, this fall seems odd. After all, this is a company that owns Dettol and Lysol — brands that shoppers have been flocking to over the last year as we’ve all become just that little more conscious of keeping things as clean as possible.

Unfortunately, it would seem that inflation is beginning to bite. A rise in the price of raw materials in the first six months of 2021 is having a negative impact on profit margins at the FTSE 100 constituent. Factor in the potential for sales of disinfectants to moderate as we emerge from the Covid-19 storm and Reckitt’s loss of momentum makes some sense.

Time to buy?

I think there are arguments for and against me buying this stock now.

The former includes the fact that Reckitt boasts a portfolio of easily recognisable, ‘sticky’ brands (which also includes Air Wick, Calgon and Durex). It seems fair to say that demand for its products will never evaporate, even if cheaper alternatives are available. This gives Reckitt a defensiveness some other companies in the FTSE 100 arguably lack. It also makes the valuation of 19 times forecast earnings tempting, in my opinion. 

The dividend stream compensates holders as well. I expect Reckitt to return 175p per share to holders this year. That’s a nice 3.2% yield at today’s share price  — far more than I’d get via a Cash ISA.

Although one should not draw too many conclusions from such as small period of trading, it’s worth highlighting that Reckitt didn’t feature in the list of most popular sells last week either. This may suggest that a least some of those buying now have the intention of staying invested for a while. 

Ongoing weakness

Of course, how long a full recovery takes is up for debate. As things stand, no one can be sure whether inflation is here to stay. If it is, there’s no guarantee Reckitt will be successful in passing on costs to consumers via price hikes. The shares will probably resume their downward momentum if sales decline. 

Regardless of this, performance over the long term hasn’t exactly been stellar. Annualised returns at Reckitt have been only slightly better than the FTSE 100 over the last 10 years. Those advocating a no-frills passive approach to investing would use this as proof that buying a specific stock rather than an exchange-traded fund isn’t worth the additional risk. So, the question I need to ask myself is whether I’d get a better result over the next decade.

On the fence

For now, I’m content to watch Reckitt from the sidelines. While I do think it will eventually recover, I also think there are potentially far better options in the index for me to make money in the meantime.

The post Investors are buying this FTSE 100 stock. Should I? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

easyJet share price: ready to fly?

There are certainly arguments for thinking the recent positive momentum in the easyJet share price will continue. After being confined to their homes for so long, I don’t think anyone can deny that demand for foreign travel and holidays from families and budget travellers is there. 

There’s also a sense that UK investors think the worst is over. Interestingly, easyJet shares were the fourth most popular buy on share-dealing platform Hargreaves Lansdown last week. The fact that industry peer International Consolidated Airlines and jet engine-maker Rolls Royce also featured is another bullish indicator (although both featured on the list of most popular sells too).  

Even so, I don’t think it’s a screaming buy. Naturally, the FTSE 250 stock’s balance sheet isn’t quite what it used to be with the company now carrying a significant amount of debt. In addition to this, easyJet will still face significant competition for passengers in what remains a cutthroat industry.

There are other, more general risks to consider. A big rise in the number of infections from the Delta variant could slow short-term demand for travel even when restrictions are lifted. Indeed, the World Health Organisation has already warned other countries not to lift Covid-19 restrictions too quickly. A higher oil price isn’t great news for airlines either.

An even stronger company?

My caution over easyJet could also be applied to package holiday firm and airline Jet2 (LSE: JET2).

Like easyJet, restrictions on travel meant Jet2’s planes were out of the sky for over half the year. Even when permitted, a “significantly reduced” number of flights took to the skies. Passenger numbers fell by 91% to 1.32 million, forcing the company to report a pre-tax and foreign exchange revaluation loss of just under £374m today.

Thankfully, this looks like being a temporary blip. Bookings for next summer have been “encouraging” and a “materially higher” proportion of these are for (higher-margin) package holidays, the company said. 

Jet2 believes it will “emerge from this crisis an even stronger company”. Is it a better buy though? I’m on the fence. Its finances look decent. Having slashed costs and propped up its balance sheet via loans, the firm has just over £1.9bn in cash. On the flip side, easyJet’s status as one of the largest airlines in the (pre-pandemic) world arguably gives it more clout. Its brand is likely to be far more familiar to travellers as well.

Cautious buy

I think there’s a good chance the easyJet share price will be higher in 2022. The same goes for Jet2. As such, I think both could be cautious buys for my portfolio. That said, I would always check that I’m sufficiently diversified elsewhere first. I’d also need to be willing to hold if things don’t go to plan. As Jet2 commented today, it still has limited visibility on performance in the current financial year.

Notwithstanding this, I think I’ve found an even better opportunity for myself elsewhere in the travel space. 

The post Is the easyJet share price about to soar? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

When a market minnow attracts more buying interest than heavily-traded FTSE 100 shares such as Lloyds Bank, Rolls Royce and International Consolidated Holdings, it’s worth paying attention. Today, I’m looking at one such stock, Sareum Holdings (LSE: SAR).

Last week, Sareum was the second most popular buy on share-dealing platform Hargreaves Lansdown. Should I be buying its stock too?

Wait – what is Sareum?

Sareum is a Cambridge-based drug developer focused on tackling cancers and autoimmune diseases. Its most advanced programme (Chk1) is currently in Phase 2 of clinical trials. However, it’s Sareum’s other development programmes (TYK2/JAK1) that appear to have got investors in a frenzy.

Last week, the company announced that it had raised £1,470,000 (before expenses) by issuing shares at a price of 4.9p. Interestingly, this money has come from just one “high net worth individual” who had already invested in Sareum. 

This money will be used to advance the aforementioned TYK2/JAK1 programmes. Right now, the company has the goal of completing its preclinical studies for its SDC-1801 inhibitor drug in Q3 of its financial year. From here, clinical trials — including the potential application of its inhibitors to Covid -19 — will commence. 

So, time to buy the shares?

Not so fast. There can be no doubt that Sareum has been a wonderful investment in recent times. Anyone buying a month ago would now be sitting on a gain of roughly 175%. The result is even better for those who’ve been holding for the last year (1,150%). And yes, some positive data in the coming months could certainly see the shares soar even higher in 2021.

However, there’s are also reasons for thinking Sareum may have peaked.

Drug development is notoriously risky from an investing perspective. For every drug that succeeds, thousands do not. Delays are also very common. Indeed, Sareum has already stated that the completion of preclinical studies is “subject to successful progress”. Should the wait be longer than expected, some holders will inevitably jump ship. Moreover, clinical trials aren’t cheap and management has already stated that they are “subject to funding“. 

I’m also inclined to take a cue from what’s been seen in other Covid-related stocks over the past year. One example of this would be hyper-popular diagnostics firm Novacyt.

Having multi-bagged over the second half of 2020, Novacyt’s momentum has since reversed in a spectacular fashion. Priced at 1,190p a pop in January, the stock closed at just under 391p last Friday. Sure, I’m arguably comparing apples with oranges here. Even so, the on-off ‘coronavirus buzz’ could lead Sareum’s share to behave in a similar manner. 

Beware the dip

While I congratulate anyone already holding Sareum, the recent spike seen in its share price would make me nervous if I were a potential investor. It’s particularly worth highlighting that the company was also the third most popular sell by Hargreaves Lansdown clients last week. After such a strong run, some profit-taking is inevitable. However, this suggests that the Sareum’s near-term performance is firmly in the hands of traders, rather than long-term investors. 

At times like this, I remind myself that no share price rises in a straight line. So, if I were tempted to buy Sareum today, I’d only consider investing money I could afford to lose. There’s no shortage of promising small-cap stocks out there.

The post UK investors are buying Sareum Holdings. Should I? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should I get involved like other UK investors or steer clear? Here’s my take.

Why is AMC stock flying?

It all seems to be down to what’s known in the business as a short squeeze. This is where previously unpopular stocks are heavily bought, forcing those who were betting the share price to fall to hastily exit their positions. This involves buying back stock they previously ‘sold’ which, in turn, causes the share price to lurch violently upwards. 

Naturally, there’s a catalyst for all this buying pressure. The huge rise seen in the value of AMC stock over the last week originates from the popular Reddit subgroup WallStBets. By coordinating their buys and pumping the stock on social media, this community (which boasts a staggering 10 million members) has succeeded in creating huge losses for hedge funds that think the company will continue to struggle. Last Thursday, it was the most actively traded stock on the entire New York Stock Exchange. 

If all this sounds familiar, it’s because we’ve been here before. In January, the value of AMC stock pretty much ten-bagged. The share price of video game retailer GameStop also soared, as did those of companies in the cannabis space. With gains like this, who wouldn’t be tempted to grab a slice of the action?

Buyer beware

Investors are routinely reminded that ‘past performance is no guide to future returns’. This is, of course, perfectly sensible advice. Even so, I do think history can offer us some ideas about what might happen next.  

Having soared to $347 towards the end of January, Gamestop stock tumbled to just $40 a few weeks later. It’s now back at $222. This shows just how volatile share prices can get when they’re influenced by little more than social media fanfare. I think we could see a similar scenario unfold from here. Anyone buying now could do very well. Or they could lose their shirt.

To really understand what I might be taking on, I also need to look at AMC’s fundamentals. And I don’t like what I see. Based on Friday’s close, AMC now commands a valuation of almost £12bn. That looks excessive when the company’s outlook is considered.

Like London-listed Cineworld, the company faces a myriad of challenges going forward. In addition to the uncertainty surrounding the coronavirus, AMC must also contend with the threat of more people streaming new movies at home. Yes, the current slate of films is encouraging but I also need to remember that success is never guaranteed. Studios can’t know in advance whether they will manage to recoup costs and cinemas can’t predict revenue and profits with much certainty. This is why UK fund managers such as Terry Smith avoid the industry.

Steering clear

Can money still be made by trading AMC stock? Very possibly. But I’m an investor, not a trader. Consequently, I think there are far less risky options out there for people like me. If I were to get involved, it would only be with money I could afford to lose. 

The post UK investors are still buying AMC Entertainment stock. Should I? appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

FTSE 100 value stock?

Lloyds Bank was the third most bought stock last week, suggesting investors are finally becoming bullish on the company. There’s certainly some positive momentum in the price. In the last month, Lloyds shares are up 32%!

Value hunters would no doubt argue that the shares still look cheap, especially if analyst estimates on earnings bouncing by almost 150% next year prove accurate. Right now, Lloyds trades on a forecast P/E of 11.

Personally, I think this remains a risky pick. For one, there’s still a possibility that the government will be unable to strike an agreement with the EU. A no-deal Brexit could mean further pain for the British economy that’s already under severe pressure due to the coronavirus pandemic.

That’s seriously problematic for a company like Lloyds, given its dependence on grabbing business from UK customers. Factor in the risk of historically-low interest rates going even lower and it’s quite possible the recent recovery will prove temporary.

The banking sector may prove a bargain if none of the above comes to pass. But that’s not a gamble I’m prepared to take. 

Patience required

Occupying second spot on the most popular UK buy list was Rolls-Royce. The FTSE 100 member has been a trader’s dream over recent months. After tumbling from 136p in July to just 39p in October, the shares have now recovered to change hands for 108p. But what happens next? 

Clearly, the next few months will be pivotal. From an optimistic perspective, an end to travel restrictions in the West could see a huge rebound in earnings.

The problem with this scenario is that the latter will now be spread more thinly due to more Rolls shares being created following its £2bn rights issue. It also assumes travellers will rush back to the airports and business meetings via Zoom are ditched.

Investors content to stick around for years could make a lot of money on Rolls-Royce’s recovery. My concern is the opportunity cost of not getting involved in other highly promising stocks and trends in the meantime. 

Risky business

Top of last week’s buy list was British Airways-owner International Consolidated Airlines. Like Rolls-Royce, it’s easy to see why. Buoyed by the vaccine news, the deeply indebted FTSE 100 airline’s share price has rocketed 77% in one month. 

I don’t doubt IAG has the potential to make investors even more money from here. Even so, I don’t expect a smooth ride. Assuming they receive regulatory approval, getting the vaccines distributed is unlikely to be as simple as some believe it will be.

Whether IAG is a buy or not depends on each investor’s tolerance for risk. Like star fund manager Terry Smith, my strategy is to look for high-quality businesses with competitive advantages that can be held for years. Note that I haven’t mentioned anything about galloping share prices. 

You pays your money, you takes your choice. IAG is not a business I want to own.

The post FTSE 100 shares Lloyds Bank, Rolls-Royce and IAG are in high demand. Should I buy too? appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Dividend in doubt?

BP may have been the third most popular buy last week but I’m not inclined to join the queue. Make no mistake, the £42bn-cap is in a tricky spot.

A struggling oil price in the aftermath of the global lockdowns has seen the FTSE 100 giant fall to its lowest valuation in 26 years. With Covid-19 cases continuing to rise around the world (particularly in Europe and the US), it looks unlikely things will change anytime soon.

Unfortunately, the coronavirus isn’t BP’s only problem. Talk about the ‘death of oil’ may be premature, but the push towards cleaner forms of energy shows no signs of slowing down. Indeed, this could accelerate further if renewables fan Joe Biden secures the keys to the White House early next month. 

BP must reinvent itself. But this will take time and barrels of cash. As such, I suspect the company may be forced to cut its dividend once again. So, while some investors may be buying for the post-virus rally, I suggest anyone looking at BP for income should look elsewhere.

Still risky

Having soared from 14p in January to a staggering 1,194p by the end of last week, it’s fair to say Novacyt has been one of the best investments anyone could have made in 2020. Based on last week’s buying activity, there could be more to come. 

As a supplier of Covid-19 tests, Novacyt has seen its revenue go through the roof. As long as we’re without a vaccine, demand for the company’s products looks likely to continue far into 2021. Even if a medical breakthrough is made before the end of the year, it’ll still take time for sufficient amounts of a vaccine to be produced and distributed.

The problem is ascertaining how much of this positive outlook is already priced in. I’d say quite a lot. Another concern is the possibility of a rival producing a quicker test and pinching contracts from under Novacyt’s nose.

For me, the shares remain a high-risk pick. Like BP, anyone thinking of buying now should ensure they’re sufficiently diversified elsewhere first.

Director buying

Taking top spot on the list of most popular stocks with Hargreaves Lansdown clients last week was Boohoo.

Perhaps this shouldn’t come as a surprise. News that auditor PricewaterhouseCoopers had resigned over concerns about the company’s reputation caused the shares to fall heavily earlier in the month. It was surely only a matter of time before the contrarians piled in. 

Among those buying was co-founder Mahmud Kamani. The fact he snapped up 300,000 shares for a cool £729,000 no doubt motivated others in the market to buy as well.

As a holder of Boohoo, I’m content to ask just one question right now. Will the online retailer’s recent woes still matter in a few years? I think it very unlikely. After all, Boohoo remains a brilliant business based purely on how it’s trading.

So long as the company does address concerns relating to its corporate governance, I’m confident this period of share price weakness will prove temporary.

The post Hargreaves Lansdown investors are buying BP, Novacyt and Boohoo shares. Should I? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Just how bad could it get for the BP share price?
• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?
• Oil prices are falling. So why am I still bullish on BP shares?

Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended boohoo group and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.