Investors stay the course with tech stocks, despite volatility

US tech stocks remained in favour among retail investors in March despite higher volatility, according to Freetrade’s monthly Retail Investor Barometer.

Tesla was the most bought stock followed by Apple, Meta and Amazon. However, Paypal, which had soared in popularity in February, dropped out of the top 15 most bought stocks.

Legal & General joined fellow UK companies BP and Lloyds Banking Group among the most popular stocks, as retail investors continued to grow their exposure to the FTSE 100. Lloyds reached the top 5, only just behind US tech stocks.

Additional key findings are:
The iShares Global Clean Energy ETF was the most popular themed ETF, as many investors concluded the shift to low-carbon technologies was likely to now accelerate in light of geopolitical events
Outside of the 15 most-bought stocks, miners and companies with pricing power, such as Coca-Cola, in particular drew the attention of retail investors to counter inflation

Commenting on the findings, Freetrade’s Head of Equity Research Paul Allison said:

“Big tech continues to be the go-to arena for retail investors. And it’s been a smart move. The Nasdaq 100 is now 8% higher than the day Russia invaded Ukraine and some of its components have done much better than that. Tesla is a remarkable 65% higher.

“Sticking with the tech giants makes sense for a couple of reasons. Firstly, their sales and profits are unlikely to be directly impacted by the Ukraine conflict in the long term. Secondly, many of the companies have solid balance sheets with little to no debt after adjusting for cash holdings, making them less vulnerable to inflation led rate rises and giving them a defensive characteristic.

“These companies outperformed during the recent correction and are leading the recovery, showing the demand for big tech is turning evergreen.

“The popularity of L&G and Lloyds demonstrate the draw of financial services companies to retail investors in the current economic climate. Both stocks offer attractive dividend yields and with the current interest rate environment helping their profits, current prospects for further payouts look good.”

Shell falls away

In contrast to Legal & General’s ascent, Shell lost favour among retail investors, with many selling the energy company*.

Paul added: “Although BP slipped down the list during the month, Shell seems to have fallen far more in popularity among retail investors. The Ukraine conflict and crude oil volatility makes energy investing a bit of a white knuckle ride. BP’s higher dividend payout offers a degree of comfort, especially with the oil price hovering around $100/barrel.

“Retail investors seem to have stepped back from oil companies a little in March, which might be a sensible move as we head into the summer and potentially calmer energy market waters”.