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The most popular shares in the 2018/19 tax year so far...

George Salmon looks at some of the shares most popular with HL clients this tax year.

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.

The last 12 months have felt tough for investors. So you might be surprised to hear the UK stock market has actually made a 3% return, including dividends. But then again, you’re much more likely to hear about billions being wiped off the market than on! Past performance isn’t a guide to the future.

Here we take a look at some of the shares that’ve proven most popular with HL clients, and evaluate their prospects for the future.

The most popular shares in the 2018/19 tax year

The links 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 the 2018/19 tax year so far. We’ve also included the most popular large* overseas shares (excluding investment trusts and ETFs).

Shares listed alphabetically, information correct as at 12 March 2019.

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

More about overseas share dealing

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

BP

Payments for the Gulf of Mexico spill back in 2010 continue, but they’re soaking up less and less cash. Organic cash flow has improved too, thanks to higher production and an oil price that, despite falling at the back end of the year, has largely behaved itself.

While these factors have been in play for a while, 2018 was the year when management felt confident enough to shift into the next gear. The dividend and share buyback were both increased, while the board also sanctioned the $10.5bn purchase of BHP Group’s onshore shale assets. That’s BP's biggest acquisition since 1999.

But where does this leave BP now?

Income has always been a major attraction of investing in oil majors, and with the shares offering a prospective 5.7% yield next year, today is no different although please remember that yields are variable and are not a reliable indicator of future income. We think the dividend looks comfortable for now, but of course there are no guarantees. However, the BHP deal means BP is more leveraged than rival Shell – and while this could amplify returns if all goes to plan, it does make it a slightly higher-risk option.

However, BP’s confident its cash flows in and out will balance at prices as low as $50 a barrel. With the current price at almost $70, we think the group looks comfortable.

Find out more about BP

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Sirius Minerals

Sirius Minerals might not be producing anything yet, but the group has ambitious plans to become the dominant supplier of polyhailite, a naturally-occurring mineral that can help boost crop yields.

The FTSE 250 group’s share price has drifted down after a significant jolt in September. Just two sentences highlight what prompted that fall.

The Company estimates that its revised stage 2 capital funding requirement will be between US$3.4 - 3.6bn (previously US$3bn), an increase of US$400 - 600m and primarily driven by an increase in the revised estimate of capital costs.

And:

The Company will review the most appropriate form of financing for the increased capital funding requirement.

Admitting costs at the North Yorkshire site have over-run was bad enough, but hinting at a dilutive rights issue was enough to send the shares tumbling. Up to that point investors thought the final stage of funding would be coming from the debt markets.

It’s not all been bad news, however. New offtake agreements have been signed, including an agreement for up to 2.5m tonnes per annum (Mtpa) in South America. That takes the group close to its stage one capacity of 10Mtpa. With prices around $140-$150 per tonne, Sirius says EBITDA (earnings before interest, tax, depreciation and amortisation) margins of up to 80% are possible.

Still, production isn’t due to start until 2021. The near-term priority is to make sure development costs are kept in line, and resolve the financing issues without diluting existing shareholders.

Find out more about Sirius Minerals

Facebook

On 6 April 2018, Facebook was still reeling from the Cambridge Analytica scandal, highlighted by Mark Zuckerberg himself as “a major breach of trust”. That meant the group entered this tax year with a depressed share price, but the group has gone through the wringer twice more.

July brought news of a material rebasing of profit forecasts and a strategic update, and in the autumn, Facebook was caught up in a damaging sell-off on Wall Street. Anyone with advance knowledge of those trials and tribulations probably wouldn’t have expected the shares to have risen by 8% so far this tax year. But that’s exactly what they’ve done. Past performance isn’t a guide to the future.

The main reason for that is, despite the negative headlines, Facebook’s numbers remain impressive. Full year operating profit rose 23%, and despite saying costs will increase and revenue growth slow, analysts still expect earnings to rise from $24.9bn last year to $35.3bn by 2021.

Profits have been driven by Facebook’s advertising power. The flagship social network attracts 2.3bn users a month, a figure that rises to 2.7bn once its other apps are included. That sheer volume, combined with the potential to target specific user groups means the company offers one of the best advertising canvasses in the world.

Engagement is still creeping up, but user growth will likely be slower in the years ahead. However, average revenue per user in emerging markets like the Asia Pacific region is just 8.5% of where it is in the US. If Facebook can close that gap, it could deliver rapid growth without adding a single extra user.

Of course, all this remains ifs and buts. Especially since the group is facing up to the challenge of adapting to a different type of social media engagement. User preference is moving towards private messaging services. Facebook has a strong presence here through WhatsApp and Messenger, but these type of services are more difficult to monetise.

Find out more about Facebook

Register for Facebook updates

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. 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.


A painful mistake?

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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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