Top 10 ISA buys on Freetrade in March
What have stocks and shares ISA investors been snapping up over the past month?
Published
September 4, 2024
Index ETFs and US tech stocks topped Freetrade stocks and shares ISA investors’ favourite stocks in March.
There’s still a noticeable lack of UK stocks among investors’ top ISA picks. That’s probably not surprising, given how unfashionable the UK’s stalwart sectors have been over the past few years.
Financial services and oil just don’t capture our imagination in the same way as big tech does. And it’s likely a sign that the London market has a lot of work to do in attracting listings fit for new generations’ view of the future.
That said, a rising rate environment could be good for some of the UK’s legacy banks and insurers, whose reliance on chunky interest margins and rising bond yields have held them back over the past decade. Whether higher rates translate into greater investor appetite for ISA stocks this side of the pond is still up in the air though.
Before we get stuck in, it’s important to highlight that this is a wrap-up, not a suggestion or recommendation that you buy or sell any of the securities mentioned.
Remember that everyone has their own goals and unique financial circumstances. These, along with your tolerance for investment risk and time horizon, should inform the mix of assets in your portfolio.
Our resource hub for investing in the stock market might be able to help make that blend a bit clearer for you and our guide on how to invest in stocks is a great start for first-time investors. And if you are still unsure of how to pick investments, speak to a qualified financial advisor.
March was a big month for Elon backers. The Tesla share price shot up as a mix of high fuel prices pushing drivers towards EVs, and a hopeful record quarter for vehicle deliveries, got investors excited.
So, did the firm manage another record delivery and production haul? Not quite.
Tesla’s 2022 first-quarter deliveries came in at 310,048, with production hitting 305,407. That’s a huge jump from the 184,800 deliveries and 180,338 cars produced over the same period last year.
But the firm wasn’t immune to the supply chain challenges hitting businesses across all sectors. Total production fell short of last quarter’s figure by 4,641 vehicles. The headline delivery measure was also below the 317,000 analysts had expected, according to FactSet.
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So, is it panic stations for Tesla? Again, not quite.
Tesla investors are some of the most die-hard fans out there and have much longer time horizons than simply looking from quarter to quarter. For most, Tesla’s capabilities go far beyond cars anyway, with the real value hopefully still to come in the battery tech and energy solutions arena.
The broadly committed investor base could well overlook a slight miss on expectations, especially in light of the supply chain chaos impacting every industry over the past few months.
March was a net positive month for the US S&P 500 index.
It capped off a difficult quarter for US stocks, particularly in the tech sector, and came as investors gained a bit more clarity around the path for interest rates across the pond.
Another factor behind the March market recovery was investor sentiment edging back to normal after the initial shock over the invasion of Ukraine.
Western sanctions against Russia amid the backdrop of a rapidly developing invasion initially provoked enough nerves to send investors into so-called safe haven assets like gold, and away from seemingly exposed stocks like international US-based banks.
But, despite positivity returning among traders, inflation is still running high. The prospect of slowing growth and an interest rate trajectory that will have to stay nimble to combat inflation might mean the index continues to look uneasy in the second quarter.
AMC investors left it late in the month to push the stock higher, but a bit of promising news was all it took for the stock to soar. The cinema firm rocketed after chief exec Adam Aron said he planned to put to work even more of the money AMC raised last year.
The company’s fans were already on high alert after the chain invested around $28m in Nevada gold miner Hycroft Mining earlier in the month. The move left a few market watchers scratching their heads but for Aron, the investment isn’t about immediate synergies, rather it’s about the skills AMC can bring to Hycroft.
He said, “In recent years, AMC Entertainment has had enormous success and demonstrated expertise in guiding a company with otherwise valuable assets through a time of severe liquidity challenge, the raising of capital, and strengthening of balance sheets, as well as communicating with individual retail investors."
And the deal couldn’t have come at a better time for Hycroft, whose share price has steadily wandered down the page since August 2020.
None of this takes away from the fact that AMC has a story of its own to turn around (which begs the question, can it really tout itself as a turnaround specialist just yet?)
Cinemas across the board have been hit hard by Omicron (and its BA.2 variant) fears, with the sector becoming a bit of a punchbag investors like to wallop when restrictions pop up. Cineworld is languishing in the UK and boutique offering Everyman is ebbing and flowing as sentiment changes, as we eye up a hopeful return to normality.
Beyond the virus, there’s still a lot for AMC and the rest of the silver screen gang to contend with, not least the rise of stay-at-home streaming services. That trend might have boomed during lockdown but it was already in full force before the pandemic and its success continues to hit cinemas hard.
March was a real month of two halves for meme stock headliner GameStop. Shares in the trade-in chain have been riding the headlines recently, and headed into March buoyed by hopes of what its NFT marketplace launch could bring in terms of revenue.
And, just as the dust was settling, in tandem with a reported $1.86 loss per share for its fourth quarter, the stock got another boost thanks to chief exec Ryan Cohen. The company boss bought another 100,000 shares in GME, bringing his stake to 11.9%, offering a signal of confidence to other investors in the firm.
Fundamentals-focused investors trying to make sense of the stock threw in the towel long ago, given just how much every new headline moves the meme stock crowd.
And the hearsay driving that volatility was in full view in March, given GameStop’s swings at the same time as AMC’s announcement of their foray into gold mining.
Contagion is a very real phenomenon in the markets, with investors often trying to use one firm’s news as an indicator of what others like it will do next. Bad or good though, guesswork like this is just that: guesswork, and not a reflection of what the company is actually doing on the ground.
It’s a worthwhile reminder to stick to the basics and not get overly enthused about things that might or might not even happen.
While further US interest rate rises are on the horizon, that doesn’t mean the market-leading firms on the biggest stock market in the world have suddenly lost all value.
And this looks to be a sentiment shared by Freetrade ISA investors who stuck with the US theme in March.
For broad US exposure, ISA subscribers favoured Vanguard’s income-accumulating ETF last month.
That’s because dividends are incredibly important to the value of total returns. According to Hartford Funds, an initial £10,000 invested in the S&P 500 over the 60 years from 1960 to 2020 would have grown to $627,161 in price terms, or $3,845,730 with dividends reinvested.
But, with the dividend taps getting steadily loosened after a dry 2020 and somewhat kinder 2021, investors have also been looking to payouts to supplement incomes.
It can be nice to see those payments land in your account, just make sure you’re putting them to good use. The last thing you want is to miss out on that glorious compound effect just because you chose the wrong version of an ETF.
Past performance is not a reliable indicator of future returns.
Another stock to see a down-up bounce in March was Apple.
The $2.8tn firm was a beneficiary of the wave of confidence that swept across markets after the initial shock of Russia’s invasion of Ukraine ebbed. With optimism around ceasefire negotiations emerging during the month, investors decided the overall narrative had grounds to be comparatively positive from here and swung back into the tech giants.
And, even with anything techy getting hit by predictions of higher interest rates, it’s the more speculative names feeling the heat. Companies without proven revenue and profit streams were hit hard early in 2022 because their path to profitability just got that bit harder.
Apple’s very much on the other side though, and hasn’t been affected as badly as the tech minnows. A big part of that is the scale Apple commands. Supply chain issues are affecting companies across the globe but it’s likely the biggest customers will be at the front of the queue when it all eases up.
It’s also about identifying management teams who can evidence their ability to execute plans and drive profits. And the success stories over the past few years don’t come more high profile than Apple.
In short, in times of turmoil, when investors step back from individual stocks to re-examine the base case for a wider theme, it’s often the proven business models they continue with. The theory is that, if that theme continues, these are the firms best placed to benefit.
The smaller challengers might make it, they might not. That’s the risk that’s heightened when external factors like the rate environment come into focus. For some, it’s a risk too far.
Broad market index ETFs can be useful building blocks for our ISA portfolios. But we need to make sure we know what’s under the bonnet.
Rushing into a global ETF might seem like it gives instant diversification (and it does compared to just holding a few stocks) but it pays to see exactly what you’re getting.
This All World ETF gives access to a range of global markets but the fund is organised by market weight. That means 59.2% of its holdings are in the US (as at 28 February 2022) with just over 6% in Japan and 4.2% in the UK.
It reflects the size of these markets and might be a useful learning point for anyone thinking it was simply a case of splitting exposure evenly around the world.
Tech made up 23% of the fund at the end of February with the top names looking like a roll call of the usual suspects. Apple, Microsoft, Alphabet, Amazon, Tesla and NVIDIA are followed by Warren Buffett’s investment powerhouse Berkshire Hathaway, semiconductor firm TSMC, Facebook parent Meta & insurance provider UnitedHealth Group.
That might come as a surprise for anyone hoping to avoid the tech names by casting their net a bit wider.
And again, make sure you’re opting for the version that suits your income needs. A distributing share class might be handy to supplement your salary but pumping those dividends back into the ETF could really kick start the compounding over the long term.
It’s hard to imagine a world without Amazon now. Both in the headline Prime services and website, and the AWS revenue driver most consumers will never see.
But even the Bezos behemoth hasn’t been able to avoid the creeping inflationary pressures swamping the world over the past few months.
In its Q4 earnings call, the firm said inflation-induced costs hit $4bn, with wages, third-party delivery pricing and labour constraints the big factors weighing on Jeff’s purse. But, in a bid to hang onto the cash pile we all gave it over the pandemic, the platform recently upped its US pricing model from $12.99 a month to $14.99. A full-year subscription stepped up from $119 to $139.
Consumers might feel a bit aggrieved, especially in light of CEO Andy Jassy’s $212m pay packet, but investors are keen to hear how the firm plans to stay on top when the lockdown boost is well and truly over.
And that’s a big task, given the sheer numbers involved. In Q4 2021, the firm raked in profits of $14.3bn on sales of $137.4bn. Putting it all into perspective, that was a 24% hike on Q3 sales and a 9% rise on the same period in 2020.
Who? Well, quite.
The mining minnow elbowed its way into ISA accounts in March after AMC’s decision to diversify its silver screens with a touch of gold.
Although investors might be a bit nervous at why AMC got involved in the first place. Hycroft’s share price has eroded over the past few years and looked to be going nowhere fast before the cinema chain came knocking.
AMC clearly sees it as a ‘special situation’ or fixer-upper that could do well with some changes. And with gold just off its all-time highs, it might signal a good time to look at struggling mining companies potentially sitting on serious profits.
According to independent studies, Hycroft’s gold mine in Nevada contains 15m oz of gold, with its silver mine housing 600m oz of the complementary metal.
AMC’s $28m injection does carry risk, not least the fact the company has no pedigree at all in mining.
But, if corporate guidance and cash confidence have been the blocker, the small cap firm will have no excuses now. And as to whether AMC can provide the restructuring it thinks Hycroft needs, investors clearly like the prospect.
Global ETFs attracted $1.22tn of our money last year according to Refinitiv Lipper. That’s 71% higher than in 2020 and meant the funds waltzed into this year with a record $9.94tn under their arm.
With active fund managers not guaranteed to beat the performance of the index they compare themselves to, like the US S&P 500, a lot of investors are clearly opting for a more passive approach instead.
A lot of ISA investors use them as the basic building blocks of their portfolios and build round them with individual stock choices. A core and satellite approach like this means you aren’t exposed to one single country or sector in particular, and still get to tilt your portfolio towards individual stock stories.
A big element here is cost. While active managers can charge close to 1% to run analyst teams and fund businesses designed to unearth tomorrow’s best stocks, simple ETF trackers can cost a fraction of that. VWRL’s headline charge is 0.22%.
The reasoning is that active managers are constantly scouring the globe, conducting research and talking to company management to funnel down those investment decisions on your behalf. With index-tracking ETFs which just try to match the market, not beat it, those costs are vastly reduced.
Regardless of which angle you come at it from, none of us should forget that it’s value that matters. If you’re paying an active manager but they’re delivering on their objectives, it might be worth it. If they aren’t, paying up for their services starts to make less sense.
Make your money work a little bit harder with a tax-efficient investing account. First, learn the basics of how stocks and shares ISA works with our guide. Then, if you know that ISAs are right for you, go ahead and open an ISA account or transfer from another provider to start contributing regularly. Download our iOS trading app or if you’re an Android user, download our Android trading app to get started investing.
