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The most popular shares in October

Nicholas Hyett assesses some of the shares most popular with HL clients in October.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Stocks with exposure to the UK economy had a bumper October, as the chances of a no-deal Brexit receded. However, with a general election just over the hill, politics continues to disrupt the stock market. That hasn’t kept investors from looking for a few opportunities though.

October’s most popular shares

The lists below show the FTSE 100 and FTSE 250 shares (excluding investment trusts) with the highest number of net buys (buys minus sells) among HL clients in October. We’ve also included the most popular large* overseas shares (excluding investment trusts and ETFs).

More about international share dealing

Shares listed alphabetically.

*Of equal or greater size than the market capital of the smallest FTSE 350 stock.

These are provided for your interest, but aren’t a guide as to how you should invest. You should consider your own aims and attitude to risk before making any investment decisions, and remember that investments will fall as well as rise in value so you could back less than you invest. Past performance is not a guide to the future. Please remember yields are variable and not guaranteed. If you’re not sure whether an investment is right for you, please seek advice.

Prudential and M&G

Prudential and M&G went their separate ways last month. It’s unsurprising the new companies have attracted attention from investors, each offers something distinctive, and the whole was very different to the sum of the parts.

It may have fingers in US retirement and asset management, but the remaining Prudential business is first and foremost an Asian led life and health insurer. That’s a market that should come with bags of opportunity as emerging economies develop.

State welfare provision is minimal to non-existent in a lot of the region, making insurance crucial. And the type of regular premium business that Prudential prefers has tended to be resilient during a downturn. It takes a lot for people to decide health insurance is no longer a top priority.

Prudential then is a potentially high growth option, even if emerging market exposure also makes it riskier. However, that’s very well appreciated by the market and the stock is highly rated as a result with a relatively modest 2.9% dividend yield.

See the Prudential share price and charts

M&G by comparison is a more established business, and growth is probably lower down the list of priorities than shareholder returns.

M&G is looking to pass on a lot of its legacy UK life liabilities, making it far more focused on asset management. That has the advantage of being a capital light option, meaning any profits are available to be distributed to investors.

However, European asset management isn’t without its challenges, with passive investment driving down prices. That hasn’t stopped analysts forecasting an 8.4% dividend yield from the group though.

See the M&G share price and charts

Direct Line

We understand the attractions of Direct Line – it’s a well-known brand, it’s paying a 9.9% prospective dividend yield and it trades on a forward PE of 9.9, below the five year average of 11.8. We like the Winston Wolf adverts too.

But there’s a reason the dividend yield is so high. Direct Line faces a number of headwinds that could put earnings under pressure going forward. To see why we need to dig into some insurance accounting.

Insurers keep a reserve of cash to pay claims as they’re settled, but if they turn out to have held back too much they can release it. Direct Line has been releasing a lot of this cash recently, but that can’t go on forever. This is set against a competitive motor insurance market, which accounts for just over half of group premiums.

Direct Line is also investing in improving its IT infrastructure. We think this is the right thing to do, but it’s not cheap. The group will need to work hard to offset this with its ongoing cost reduction program.

See the Direct Line share price and charts

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Twitter shares tumbled 20% after third quarter results disappointed. That highlights the risks and bumps that come hand-in-hand with investing in new technology companies.

Issues with a legacy advertising product, preventing effective targeting and sharing data with partners, saw revenue growth slow. Twitter sees the issues as more of a blip, but we think the market was right to worry – targeted advertising is the group’s bread and butter.

To keep its appeal to advertisers and partners, Twitter will have to grow user numbers and help advertisers target them effectively.

So far it’s doing well on the popularity front. Twitter now boasts a daily user base of 145m, up 17% from last year. That’s the highest rate of growth in the last two years.

Keeping those users happy is a different challenge. It’s not just about better personalisation or new products for advertisers, but keeping the Twitter population safe too. Data breaches now come with hefty fines and reputational damage, so Twitter will have to invest to ensure it stays ahead of the game. With costs set to rise, Twitter needs to cash in on the extra eyeballs it’s harvesting.

See the Twitter share price and charts

Before you can invest in US companies you’ll need to complete a W-8BEN. Find out more about the charges.

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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