The funds, investment trusts and shares investors have been snapping up to ‘buy the dip’
Investors have been buying oil companies, banks and index trackers.
25th March 2020 15:26
Investors have been buying oil companies, banks and index trackers.
Countless investment gurus in the past have made the simple point that when the markets fall, rather than be despondent, investors should go out to buy.
That’s obviously easier said than done. Some companies may end up going bust or being bailed out (and having their shareholder equity diluted) and some markets may have a long way yet to fall. This is especially true in the current bear market, which has been brought about by an unpredictable global pandemic.
That, however, has not stopped some brave investors attempting to buy now-seemingly cheap assets. Although, those buying now do risk catching the proverbial falling knife.
Data from interactive investor (Money Observer’s parent company) for the period 9 March to 20 March shows the most popular individual equities for investors to buy have been the share prices that have recently taken the biggest beatings.
The most popular buy has been Lloyds Banking Group, while the fourth and fifth most popular buys were Barclays and Aviva. Major UK financials have taken some of the brunt of the coronavirus sell-off, with Lloyds and Aviva both down over 50% year-to-date (to 23 March).
Second and third on the list are oil companies BP and Shell. Both have faced large slumps in their share price due to the decline in the price of oil. Oil has seen its price collapse due to both expected lower demand as the world economy shuts down and the outbreak of a price war between Saudi Arabia and Russia, two of the world’s largest producers.
As the table below shows, these five companies, the most bought on ii, have seen their buys hugely outweigh sells.
The five most-bought equities
| Company | Buys | Sells | |
|---|---|---|---|
| 1 | Lloyds Banking | 79.50% | 20.50% |
| 2 | BP | 85.45% | 14.55% |
| 3 | Royal Dutch Shell | 87.90% | 12.10% |
| 4 | Barclays | 80.84% | 19.16% |
| 5 | Aviva | 80.97% | 19.03% |
Other oil companies such as Tullow Oil and Premier Oil were also among some of the most-bought companies.
With investors appearing to favour equities that have seen huge price declines, it is no surprise, therefore, that airlines are also among some of the most bought. IAG, the owner of British Airways, was the seventh most bought share, while budget airline easyJet was in 14th place.
When it came to funds, investors appeared to be taking a strategy of “buy the dip” through passive products, with eight out of the 10 most bought being index trackers. The most popular was the iShares FTSE 100 tracker. Also in the top 10 is the Vanguard FTSE 100 tracker. The UK market does look particularly cheap right now, largely owing to its heavy weighting towards energy and commodities.
However, not everyone has been banking on a FTSE 100 recovery anytime soon. Within the top 10 was also L&G’s Super Short FTSE 100 ETF. The ETF is a short strategy, providing a return when the index falls, by a factor of two. This means that if the FTSE 100 falls 1% in a day, the fund should see a gain of 2%. As can be seen on the table below, its buy and sell ratio split is 52%/48%, indicating that some investors have been actively trying to time the market.
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The five most-bought investment funds
| Fund | Sector | Buys | Sells | |
|---|---|---|---|---|
| 1 | iShares Core FTSE 100 UCITS ETF | UK Large-Cap Equity | 82.04% | 17.96% |
| 2 | Fundsmith Equity | Global | 46.50% | 53.50% |
| 3 | Vangaurd FTSE 100 UCITS ETF | UK Large-Cap Equity | 86.64% | 13.36% |
| 4 | Vanguard S&P 500 UCITS ETF | US Large-Cap Blend Equity | 71.11% | 28.89% |
| 5 | L&G FTSE 100 Super Short x2 ETF | Leveraged/Inverse Equity | 51.54% | 48.46% |
Investors also opted for funds tracking the S&P 500, gold and the FTSE 250.
The two active funds among the most bought were Fundsmith Equity and Lindsell Train Global Equity. Both have been investor favourites for the past decade, with a strategy of buying quality companies for the long term. Although, it is interesting to note that over the two-week period (9 March to 20 March) there were slightly more sells than buys for Fundsmith Equity: 46.5% buys versus 53.5% sells.
In terms of investment trust purchases, investor behaviour appeared little changed than from before the coronavirus panic. Scottish Mortgage remained the most popular trust, with regulars such as City of London, Finsbury Growth & Income, Smithson and Monks and Allianz all in the top 10.
Investment trust discounts have widened across the board, handing brave investors the opportunity to buy trusts at a cheaper price. Even trusts that usually trade on a premium have slipped to discounts, including Finsbury Growth & Income and Smithson Investment Trust.
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The five most-bought investment trusts
| Trust | Sector | Buys | Sells |
|---|---|---|---|
| Scottish Mortgage | Global | 64.00% | 36.00% |
| City of London | UK Equity Income | 81.58% | 18.42% |
| Alliance Trust | Global | 62.11% | 37.89% |
| Finsbury Growth & Income | UK Equity Income | 60.61% | 39.39% |
| Smithson Investment trust | Global Smaller Companies | 59.04% | 40.96% |
- See our latest articles on investment trusts
This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
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