Early bird investors swoop on FTSE stalwarts and tech giants

• Tech giants remain in top ten of most popular shares since start of new financial year in the HL Stocks and Shares ISA.
• Early bird investors are also snapping up UK-listed stocks as FTSE 100 reaches fresh highs.
• Legal and General leads the top ten in terms of net buys with Tesla close behind.
• Early bird share commentary on individual stocks.

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

‘’Investors have been wasting no time at the start of the tax year, with early birds swooping on companies which have been driving stock market returns, while others spy the potential for fresh gains ahead. AI excitement continues to influence buying behaviour as demonstrated by Nvidia and Microsoft retaining spots in the top ten. Tesla’s brand power and its front seat in the self-drive revolution, with the data mining possibilities that offers, has also succeeded in drawing in frequent trades. However, the list of most popular shares is a reasonably diversified one, as alongside tech selections there are some FTSE 100 stalwarts, just as the blue-chip index reaches fresh record levels. Among early bird favourites are financial services companies and defence giant, BAE Systems. It serves as a reminder that that geopolitical tensions and government spending pledges can drive investment interest, and that attractive dividends remain a big draw.

While individual shares remain a popular pick for HL Stocks and Shares ISA portfolios, it’s important that investors remember not to put too many eggs in one basket.  It’s sensible for a pick of funds across different sectors and geographies to be the main body of any investment, with shares chosen alongside. The funds should be top billing, but in any line-up there’s always space for individual stocks to play an interesting part in a portfolio.

HL data

Early bird share commentary

Legal and General Group

Legal and General disappointed in its full year results and the share price has fallen back over the past month, but its still attracted interest among investors. Some early birds may have been buying the recent dip, while others may still be attractive by its considerable annual dividend yield hovering above 8% and are hopeful that the new CEOs strategy will propel growth higher. The investment management arm continues to feel the effects of higher interest rates and any signs that inflation is set to stay more stubborn could cause a fresh wobble.

Phoenix Group

There is ongoing appetite for Phoenix Group holdings, with investors likely to have been attracted by its annual dividend yield of more than 10%. Sentiment towards the company has lifted over the past few months, following its announcement in November that it was lifting its full-year cash generation targets. It came after completing the funds merger of its Standard Life and Phoenix Life businesses into a single entity, bringing together 8 million policies. 

BAE Systems

UK listed aerospace stocks are likely to benefit from a fresh round of investment into bolstering the UK’s armed forces. BAE Systems has already been beefing up its revenues and underlying profits as demand has increased for the products it manufactures – from fighter jets to submarines. The group booked £37.7bn worth of orders in 2023, taking the order backlog up to a record £69.8bn. And because these are typically long-cycle orders, with revenues spread over several years, it gives BAE multi-year revenue visibility. With the pledge to increase UK defence spending to 2.5% of GDP, it offers the potential for an even stronger pipeline of orders. As well as being a key supplier to the UK, it also has a huge business in the US, which last year made up 43% of sales, and the Biden administration’s intention to increase the Department of Defense’s budget by around 4% is also likely to be beneficial.

M&G

M&G beat expectations for both underlying operating profit and capital generation in full year results, which appear to have increased appetite for holding the stock. M&G is an asset manager at its core, with life insurance and wealth management supporting the main event. There’s a focus on increasing the size of the Asset Management and Wealth businesses from 42% to 50% of profits and momentum is building in those two areas.

Aviva

Aviva is a stable for not only insurance, but wealth management and retirement as well and its full year results inspired confidence. The company reported a higher operating profit than forecasts, and a better-than-expected dividend outlook.  Although General insurance in the UK & Ireland saw more challenging conditions for parts of last year, things are looking up. Premiums across the portfolio are up 24% and slowly starting to yield results. The recently announced Probitas acquisition gives Aviva a foothold into the Lloyd’s of London insurance market, a deal which offers access to a new market and the potential for attractive margins.

MicroStrategy

MicroStrategy is an Enterprise software and analytics company but it’s the company’s big investments in Bitcoin which appear to have propelled interest in the stock. The heightened buying activity in April came as the price of the crypto currency turned more volatile ahead of its halving event.  This saw the reward for mining transactions slashed, reducing the rate at which new coins are created and lowering the availability of new supply. It seems clear that MicroStrategy has been targeted by speculators, keen to attempt to catch a ride on the coin’s fortunes, but with the price so temperamental, it’s a highly risky strategy.

Nvidia

Nvidia has been super-charged by the AI boom, and investors are eager not to miss out as results keep powering past expectations. Its chips are in super-high demand to train large language models and for generative AI products and services. Appetite for cloud space to store and analyse the data companies need to help them make the most of this new technology is also powering growth in its data centre division. Although smaller rivals are gearing up in terms of competition, Nvidia is benefiting from significant first mover advantage and its partnerships with customers and suppliers mean its well-placed to maintain its dominant position.

Microsoft

Microsoft is in one of the strongest positions to benefit from the AI revolution given that artificial intelligence can be integrated into the majority of Microsoft’s existing products which are so widely used in homes and businesses around the world. Microsoft’s own cloud security, analytics, productivity and storage offerings should stand to benefit as businesses seek to up their defences and workplace efficiency. Within Azure, it’s Cloud services division, demand for AI services is a big growth area, attracting new clients as Microsoft competes against rivals like Amazon’s AWS.

Tesla

Early bird investors who bought Tesla’s shares at the start of the ISA season will have been rewarded, given shares have risen more than 10% over the past month. After pleasing the market with plans to accelerate the delivery of its affordable models, Elon Musk’s sights have been set firmly on ensuring it has a front seat in the development of autonomous vehicles. By joining forces with Baidu, and using its navigation system, it should be able to roll-out its full self-driving system, which has been available in other countries but not China. The deal underlines Tesla’s revolutionary force in the market. However, it’s still tough in the EV market with Chinese rivals’ intent on stealing market share and margins are likely to continue to stay under pressure.

Tesco

Tesco has attracted early bird interest as it ended the financial year on a high with increased profits and market share gains. Its enormous scale and deep-rooted relationships with suppliers have helped to keep prices low and shoppers flooding through its doors. Its wholesale arm is also performing well, with strong growth across catering and retail businesses. With the pain of inflationary pressures easing, Tesco is also expecting a marginal improvement in adjusted operating profit, which has given the company added confidence to plough ahead with the share buyback programme. Competitive pressure amongst the grocers remains high. But Tesco is clearly optimistic that quality of its reliable revenue streams, current business strategy and market-leading position will be sufficient to drive further growth.’’