Most popular shares with DIY investors in 2023

Most popular shares with DIY investors in 2023

• Legal & General Group was at number one in the top ten most popular shares.
• Dividends appear to be a big draw for investors in 2023.
• UK-listed companies remain popular among retail investors and dominate the list.
• Tesla is the only overseas stock in the top ten, nestling near the top of the table.
• Companies in banking, mining and defence sectors prove attractive.

Susannah Streeter, head of money and markets, Hargreaves Lansdown:

‘’London-listed companies remain a big draw for UK retail investors even though the FTSE 100 has been lagging its international peers. According to net buys on the HL platform across 2023, investors are seeking out stocks which offer the potential for income and solid returns, with some big dividend players in the list, including Legal and General, scooping the number one position. There is clearly some bargain hunting going on, with some of the big names having suffered this year as market conditions have proved less clement amid economic uncertainty and high interest rates prompted by painful inflation. Lloyds Bank is a perennial favourite, again showing up in the list, alongside Barclays. Glencore offers diversification in the mining industry and BAE Systems is a draw amid heightened geo-political uncertainty. Tesla is the only overseas company listed in the top ten, jostling near the head of the pack, with investors still appearing super-confident about its prospects in the EV fast lane.

1) Legal and General

Investors have been attracted by the solid returns offered by Legal and General with its annual dividend yield of just under 8%. Legal and General is a big financial services player with its fingers in many pies from insurance to investments.  Higher interest rates have been causing some trouble for assets under management from the investment management division, though things are starting to stabilise. But at the same time, higher rates are benefiting the larger pension businesses.

2) Tesla

Tesla is still in pole position when it comes to interest among investors amid a congested lane full of EV makers. It’s the second most popular buy on the HL platform this year, and the recent recall of 2 million cars on its own is not likely to significantly quash enthusiasm. After all, recalls in the car industry are far from unusual and the group also has the financial ability to invest in fixes. Past exuberance surrounding Tesla has already been ebbing due to concerns about profitability given the price cuts brought in to try and entice consumers amid a high interest rate environment. But Tesla’s prowess in coming up with novel and industry-shaping products simply can’t be ignored.

3) Aviva

Income investors are likely to have been attracted by Aviva’s dividend yield, hovering above 7% and evidence that the company’s Aviva’s ongoing transformation is reaping rewards. Aviva also offers strong diversification across the pensions, insurance and increasingly the wealth management business. It’s also ahead of the curve when it comes to digitisation which should offer benefits of cross-selling longer term.

4) Lloyds

Lloyds is again a popular share among retail investors and has been boosted this year by high interest rates. The company is highly focused on traditional banking products with almost three quarters of total income interest related. However, as an economic bellwether at a time when the UK is stagnating there are headwinds potentially brewing. The business model has higher exposure to potential loan defaults, and there is a risk these could rise further given that the economy is showing signs of shrinking. Mortgages issued over the pandemic are coming up for renewal at less profitable levels. However, at current valuations the risks may be being overplayed given its strong capital levels and decent asset quality. Mortgage comparisons will also ease toward the back half of 2024 which are likely to paint a more positive picture.

5) Glencore

It’s been a tough year for Glencore, with a significant drop in profits in the first half, as commodity prices have come back down to earth with a bump compared to last year. So, bargain hunters may have taken advantage of the share price falls. Glencore has diversification in its huge portfolio and has a keen eye trained on the energy transition with its investments in copper and nickel, which is likely to have piqued investor interest. Glencore has had relatively strong credentials for managing ESG issues as a mining company. However, it has recently upped its investment in coal in a big way, with the acquisition of a majority stake in Teck’s steelmaking coal business for a hefty for $6.9bn in cash. While it’s recognised fossil fuels will still be needed as the world transitions, it’s a little unclear how ongoing investment tallies with its net-zero carbon emissions target. However, the plan is to eventually hive off its coal division, which would potentially calm ESG concerns.

6) Barclays

Barclays is also a popular pick even though it’s less reliant on traditional interest income for its profits, so it hasn’t enjoyed quite so much of the benefit of higher base rates, compared to some of its peers. Nonetheless, the ramping up of rates has benefited the bottom line and they are expected to stay elevated for some time. As volatility has hit financial markets, amid uncertainty about economic prospects, fees for its large investment division have been weaker than forecast, and it’s already been anticipating a higher number of loan defaults. But Barclays diversified characteristics do bode well for the longer term.

7) BAE Systems

As geo-political concerns continue to fester, and government look set to keep increasing defence budgets in response to international events, there has been continued interest in BAE given its key space in the market, particularly for fighter jets and aircraft carriers. The jet maker’s recently been spending big by acquiring Ball Aerospace, in a forward-looking move to build out its space capabilities, a market which is forecast to be heading on a sharp upwards trajectory. BAE has a healthy long-term order book but ongoing profitability hinges on an ability to estimate future costs. The lengthy nature of many contracts means related risks and costs can change over time.

8) Vodafone

Vodafone is a top pick among investors despite the turbulence which has hit the share price this year, an indication that there are bargain hunters hoping to see a recovery. Vodafone is looking for ways to streamline the business, and the hoped-for tie up with Three is part of that vision, with cost efficiencies in focus. It’s offloading struggling divisions, such as its Spanish operations, and all options are still on the table for the Italian business. Annual prices hikes have helped offset fragile customer numbers, so a potential move by Ofcom to stop inflation-linked price increases would be a blow.

9) British American Tobacco

Dividends offered by British American Tobacco are also likely to have been a big draw, but financial performance has disappointed this year. It’s finding it hard to hang onto market share for cigarettes and cigars in the key US market and while its increasingly hopeful that vapes and other smokeless products will be the cash cows of the future, there are potential hazards in the way. Some vape products have been banned in the States and calls for higher taxes could squeeze revenues and profits.

10) Phoenix Group

Long-term savings and pensions business Phoenix Group has lost ground this year, amid a challenging market environment and some uncertainty about the merger of its Standard Life and Phoenix Life Assurance Limited businesses into Phoenix Life. But shares received a jolt of enthusiasm after the company upgraded its cash generation target to £1.8 billion this year. After the purchase of Sun Life of Canada UK last year, there is speculation there might be plans for more mergers and acquisitions in the pipeline.”

Top ten shares on HL platform in 2023 (net buys)