Tech stocks remain in favour among retail investors

US tech stocks maintained their popularity among retail investors in February, according to Freetrade’s monthly Retail Investor Barometer.

While Tesla was the most bought stock, it was closely challenged for the top spot by Meta (formerly Facebook), as investors took advantage of its recent sell-off to pick up shares in the company. Similarly, Paypal soared in popularity, after its stock price plunged by almost a quarter.

BP and Lloyds continued to lead the way for UK stocks, as retail investors grew their exposure to the FTSE 100.

Additional key findings are:

Tracker ETFs remained popular among investors, with Vanguard’s S&P 500 accumulation and income-distributing tracker ETFs both in the top 10 most bought stocks

Outside of the 15 most-bought stocks, miners and financial services firms in particular drew the attention of retail investors to counter inflation

Commenting on the findings, Freetrade’s senior analyst Dan Lane said:

“US tech stocks may be feeling the pressure of a higher interest rate trajectory across the pond but that clearly hasn’t put retail investors off. Behind those valuations are titanic businesses still at the forefront of how we live our lives. Shareholders who can’t really see a world where that doesn’t continue are only too happy to snap up shares at cheaper prices.

“It’s all too easy to say investors were naïvely buying overvalued firms over the pandemic – the fact they’re buying at more reasonable valuations now is an insight into just how long term these thinkers may be.

“While Lloyds acceleration up the ranks is likely a response to a huge one-day drop in its price after reporting its results, the bank has been climbing slowly up the table for a few weeks. That same rate outlook could be a boon for the UK’s largest mortgage book. The recent volatility, as well as a raised dividend and share buyback plans, might have signalled an entry point to a lot of value-hunters too.

“As market volatility heightens in light of global events, it’s important to have a sufficiently diversified portfolio and continue to focus on the long term”.

Pfizer & Cineworld

In contrast, Pfizer and Cineworld lost the affection of retail investors, with many deciding to sell the pandemic headliners*.

Lane added:

“We aren’t out of the Covid woods yet but investors are clearly gearing up for a time when the point-in-time pandemic plays are in the rearview mirror. Tech stocks still have a lot to give in their eyes but Pfizer’s time in the sun will be hard to replicate consistently and the Cineworld bounceback has fizzled.

“We might get back to the silver screen but there can only be so many false dawns for these recovery plays before investors eventually move onto longer-term strategies and lose patience with the stocks that might bounce or might not.”