Top 10 stocks and shares ISA buys in October

Top 10 stocks and shares ISA buys in October
We take a look at what Freetrade customers bought last month.
David Kimberley
November 1, 2021

It’s been another wild month in the markets. 

Facebook took a pounding in the news, Tesla hit a $1tn valuation, and shares in its EV competitor Lucid saw a meteoric rise for the second time this year.

In the wider market, the S&P 500 continues to trade at record highs despite supply chain problems, inflationary fears, and the lingering effects of the coronavirus.

Partly that’s because earnings were still on target for many of the index’s big players. Alphabet, Facebook, and Microsoft pulled it out of the bag and announced strong year-on-year growth for the third quarter last month.

Apple was something of an outlier here, with the iPhone maker saying it missed out on $6bn in revenue because of supply chain problems.

And if this all seems very US-focused then you only have yourselves to blame. After all, we’re only writing about what Freetrade customers bought the most for their ISAs in October. 

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. 

1. Tesla

Are you really surprised this is number one? 

Tesla fanatics have pumped up Tesla’s share price to the point that the carmaker is worth over $1tn.

In some ways the firm keeps proving the haters wrong. There were always concerns Tesla wouldn’t be able to deliver meaningful growth and that it was overly reliant on tax credits to actually turn a profit.

The story has changed a bit since then, with the firm both delivering strong results and, late last month, cutting a $4bn deal with car rental firm Hertz.

All of this gives the impression that Tesla’s high valuation may simply reflect its long-term growth potential.

But as always, there is a risk of overpaying. Tesla may be delivering the goods but that doesn’t mean you have to pay so much for its shares or that they do genuinely reflect its future prospects.

Buying into the company now could be seen as a risky move to make as a result. For the Elon fanatics out there, that’s not the same as saying it's a bad company or even a bad investment, only that there are facets to its fundamentals which mean you should be very cautious before doing anything.

2. Facebook

This one may surprise some people given the awful month Facebook had.

Like some sort of medieval heretic, the social media company spent much of October being dragged through the media muck after a former executive at the company began leaking information about its less scrupulous behaviour.

The main complaint seems to be that Facebook spreads divisive and misleading news which damages the fabric of our society. 

No irony, of course, that the first leaks were published by the Wall Street Journal, a company owned by Rupert Murdoch who would never engage in publishing salacious or bombastic material.

Anyway, Facebook published financial results that showed a substantial uptick in revenues. It also rebranded to Meta and seems to be set on developing a whole new VR world that it wants to make money from. 

Those bottom line figures may explain why Freetrade customers were happy to snap up its shares.

Media hate, perhaps published on Facebook, can give you the impression a company is doing badly when it may not be in reality.

That can mean people selling off are panicking about nothing and giving others a buy opportunity. 

Basically Freetrade investors may be following the wisdom conveyed by this author’s new favourite proverb: the dogs bark, the caravan moves on.

3. Vanguard S&P 500 (Dist.)

This may come as a shock to people that like to YOLO all their money on GameStop but some people invest in index-tracking ETFs, top them up once a month, and do absolutely nothing else.

And to prove that point, you can see plenty of Freetrade customers snapped up Vanguard’s S&P 500 tracker last month.

The index is still hitting its highest levels ever, which may give some cause for concern. 

As we wrote recently, markets can (and do) crash, so even having an ETF carries risk with it.

The other point to note is that this particular ETF pays out the dividends it receives. 

As we showed in that market crash article, the S&P 500 returned about double the amount over a 25-year period when dividends were reinvested compared to when they weren’t.

If you have no plans on spending the income you receive from an ETF or you reinvest it anyway, it may be wise to think about putting money into one that reinvests dividends for you — it could make a big difference to your total return.

Figuring out whether an ETF pays dividends or reinvests them is pretty simple. Typically the ETF will have “(Dist.)” at the end of its full name. Alternatively, you check the issuer’s factsheet and they’ll say what they do with dividends.

4. AMC Entertainment

AMC was still in the top 10 ISA buys in October.

The cinema stock has seen some wild swings over the past six months, in part driven by a surge in Reddit users snapping up its shares.

According to one recent report, about 80% of AMC stock is now held by retail investors. By comparison, around 80% of the S&P 500 is held by institutions.

AMC was making a profit prior to the pandemic but it was, and remains, heavily indebted.

Coronavirus restrictions have also made a huge dent in the firm’s earnings. 

It may be the case that the cinema chain turns things around as those restrictions loosen and we’re allowed back into theatres again.

But more studios doing direct-to-streaming releases could make things tricky and even prior to the pandemic AMC was a low margin business. 

Combined with the huge amount of hype around the company, it might be seen as  a risky investment to make.

5. Vanguard S&P 500 ETF (Acc.)

Remember earlier in this article when we talked about ETFs that keep dividends and reinvest them, rather than paying them out to shareholders?

Well, this ETF does just that.

Like the prior ETF it tracks the S&P 500 but doesn’t distribute income to investors, hence the (Acc.) after its name.

The odds are investors here are holding for the long-run and want to see their investment accumulate in value over time, as opposed to keeping the dividend income for themselves.

6. Lucid Group

Founded back in 2007 by a couple of ex-Tesla employees, Lucid started life as a battery maker for other car manufacturers.

It has since branched out and started making its own electric vehicles. About 13,000 people started receiving the company’s first car — the Lucid Air — in October.

Perhaps because of this, as well as some hype around Tesla leaking out into other shares, Lucid saw a substantial increase in its share price last month.

The company came to market via a SPAC earlier this year. When the terms of that deal were first announced in February, it saw a spike in price, followed by a massive drop.

As with Tesla and much of the wider EV sector, some of the activity we’ve seen in Lucid shares suggests they’re subject to a lot of speculation.

That says nothing about whether or not the company is a good business or not. What it does mean is that investors should be prepared for a lot of price swings if they plan on holding for the long-run.

7. Apple

Given the big tech firms have spent much of the pandemic blowing it out of the water, it was surprising to see Apple disappoint investors with its Q3 results.

Of course, the word ‘disappoint’ means something different for Apple than it usually does for other companies. The tech giant still made $83.4bn in the three months to October, missing out on analyst expectations of $85.1bn.

Interestingly that was not because of a drop in demand but the result of the supply chain problems we’re hearing so much about at the moment.

Apparently Apple has found it harder to source semiconductors for its tablets, phones, and laptops. The pandemic is also still causing problems at the company’s manufacturing sites in China.

Apple has said those hurdles will still be in place during the final three months of the year and are likely to continue crimping revenue.

Long term investors probably won’t be too bothered by this stuff. For one, these are problems outside of the company’s control and they don’t reflect badly on the business. The demand is there, the supply just can’t get to them.

Plus it seems possible that these problems will dissipate in the near future, even if it's hard to say when exactly they’ll end.

8. Vanguard FTSE All-World (Acc.)

At number 8 on our list is Vanguard’s FTSE All-World ETF.

As the name suggests, the fund tracks an index, which gives investors exposure to different companies from across the globe.

This can be a good option if you want to try and reduce the market risk that may be more particular to one country.

The potential problem for FTSE-All World investors is that the ETF, despite the name, is actually heavily skewed towards the US.

In fact, more than half of the fund’s holdings are in companies listed in the Land of the Free.

That may seem a little odd but, as Roy Keane would say, the fund is just doing its job. 

US companies are worth about 56% of the total value of the world’s listed equities. As an ETF typically allocates funds by market cap, it follows that Vanguard's fund is structured in the way it is.

9. Alphabet

Google parent company Alphabet produced another bumper set of results at the end of October.

Total revenue came in at $65.1bn versus the $63.3bn that had been predicted by analysts. Profit also beat expectations, coming in at $18.9bn — more than $3bn ahead of the $15.8bn analysts were hoping for.

Even prior to this investors were probably snapping up shares in the group.

Much has been made of how pricey US tech shares are. The thing is, they keep delivering double-digit growth every quarter, which is exactly why people are usually willing to pay more for a company.

Whether or not that continues is up for discussion but, as long as it does, the odds are you’ll have to cough up a decent amount if you want to invest in the likes of Alphabet.

Fractional shares make this process easier but the valuation remains the same.

10. Vanguard FTSE All-World ETF (Dist.)

Last on our top 10 list for October is another FTSE All-World ETF. 

As with the two S&P 500 tracker funds, the difference here is that this one pays out dividends, rather than reinvesting them.

Again, this seemingly minor difference is probably the most important thing to be aware of if you are primarily an ETF investor.

If you do not want or need dividends, investing in a distributing ETF, like this one, is likely to reduce your overall return, if indeed you see a return at all.

So be careful of it and make sure you pick ETFs which best suit your investing needs.

Get to grips with how to build your wealth using an ISA account or a SIPP pension account. Our jargon-free guides are a great place to start learning how a stocks and shares ISA works and how to build a pension pot with a SIPP. Download our iOS trading app or if you’re an Android user, download our Android trading app to get started investing.

Important Information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio, and any income you receive, can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

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