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Brexit buys: how HL clients picked up a bargain

| 23 September 2016 | A A A
Brexit buys: how HL clients picked up a bargain

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Three months to the day since the referendum on the UK’s place within the European Union, I revisit Hargreaves Lansdown clients’ top buys immediately after the vote, and discuss how the dividend yield on the UK stock market remains a key attraction for investors.

Applying Buffett’s mantra

It may seem like a lifetime ago, but in the immediate aftermath of the Brexit vote the UK stock markets were a sea of red, downwards pointing arrows. However, amid the panic, many Hargreaves Lansdown clients were bold enough to view the market sell-off as a buying opportunity, and were, in the words of Warren Buffett, ‘greedy when others were fearful’. In this time, trading activity increased dramatically, with a clear majority of the deals buy trades.

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Trading data from Friday 24 June

  • Peak of over 10,000 visitors to the Hargreaves Lansdown website per minute
  • HL website visits on the day hit an all-time high, at over 600,000
  • Volume of trades 557% higher than the previous Friday
  • Buys made up 72% of trades (compared to 61% a week earlier).

With the FTSE 100 now comfortably above pre-Brexit levels, the market has more than recovered the losses sustained in the days after the vote. This means that so far, those who moved to capitalise on the short and sharp market sell-off are, in many cases, sitting on healthy gains. I’ve taken a look at our own trading data, which reveals the five most bought shares on the day of the referendum result.

Most bought shares Price move since close on 24 June Prospective yield*
Lloyds Banking Group 0.2% 5.5%
Barclays 11.5% 1.8%
Taylor Wimpey 11.5% 7.4%
Legal & General Group 18.1% 6.5%
Aviva 19.5% 5.1%

*Source: Thomson Reuters, 21 September 2016, variable, not guaranteed and not an indicator of future performance

As at the close on 21 September, four of the top five have risen by 10% or more from their closing price on 24 June, although past performance is not a guide to the future. The fifth, Lloyds Banking Group, is level although investors are in line to receive the interim dividend payment, due on 28 September. Taylor Wimpey has also gone ex-dividend, while Barclays and Legal & General have already made a payment post-referendum.

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With the exception of Barclays, each of the five most bought shares currently offer of a prospective yield of at least 5% according to analyst forecasts (variable, not guaranteed, not an indicator of future performance). We still believe that the stock market’s ability to generate an income through dividends makes up a key part of its attraction at the moment. Since the vote, the Bank of England has again moved to lower interest rates, its tenth cut in the last nine years, and rates now look set to stay low for the foreseeable future.

Many cash accounts now offer less than 0.5% interest, and with higher inflation looking more likely following the fall in sterling, many savers could find that the real value of their savings falls in the coming years. The income on offer from other avenues has fallen recently too, with government bond yields compressed to historic lows by the Bank of England’s quantitative easing policy. In this environment, it is worth asking where else income-seeking investors can go.

The search for income

Provided investors are comfortable with the fact that their capital will fluctuate in value over time, we feel that there are plenty of attractive options in the stock market, from both individual shares and managed funds.

If you are looking for individual shares that can generate an income, our articles on key signals for dividend investors and investing amid low interest rates could be of interest. For funds, our expert research team works hard to compile and update the Wealth 150+ list, which includes specialist UK equity income funds managed by the fund managers who we believe are among the best around.

These funds include the Artemis Income and Threadneedle UK Equity Income funds, both of which yield 3.7% at present. They also offer the potential for income and capital growth in future. Investors should always remember that both dividends and capital values can fall as well as rise over time, so you could get back less than you invest.

More information on the Artemis Income fund

Please also read the Key Investor Information Document (KIID) for the Artemis Income fund

More information on the Threadneedle UK Equity Income fund

Please also read the Key Investor Information Document (KIID) for the Threadneedle UK Equity Income fund

The information in this article is not intended to be advice or a recommendation to buy, sell or hold any investment mentioned, nor is it a research recommendation. No view is given as to the present or future value or price of any investment, and investors should form their own view in relation to any proposed investment.