What are the most popular stocks in the UK markets right now? There are a couple of ways to answer that question. First, I could look at the stocks that are trending upward in price much faster than the market as a whole. Second, I could look at what stocks most investors are snapping up for their portfolios.
Relatively strong FTSE stocks
My preferred way of searching for the top trending stocks in the UK is to screen for relative strength. Relative strength compares the percentage price change of a stock to the percentage price change of a broader market index. Higher positive values demonstrate overperformance. The top trending stocks in the UK over the last week as measured by relative strength are Essensys (44%), Card Factory (26%), RWS Holdings (22%), Induction Healthcare (21%), and Steppe Cement (16%).
Table 1. Top trending stocks in the UK right today measured by relative strength
|Name||Ticker||Market Cap||Relative Strength (One Week)||Industry||Index|
|Essensys||ESYS||£74.0m||44%||Software & IT Services||FTSE Aim All-Share|
|Card Factory||CARD||£205.5m||26%||Speciality Retailers||FTSE All-Share|
|RWS Holdings||RWS||£1,661.9m||22%||Professional & Commercial Services||FTSE AIM All-Share|
|Induction Healthcare||INHC||£58.9m||21%||Software & IT Services||FTSE Aim All-Share|
|Steppe Cement||STCM||£78.8m||16%||Construction Materials||FTSE Aim All-Share|
All of these UK top trending stocks are small cap. All except Card Factory are listed on the FTSE Alternative Investment Market (AIM) rather than the main market. The problem with looking at short-term trends is that they tend not to persist. I would not use these top trending stocks over the last week as a buy list. Last week things looked very different.
AIM-listed biotechnology and medical research stocks dominated last week’s top trending UK stocks list and none feature on this week’s list. I take this as a reminder that taking a short-term view of the markets is to be avoided.
Table 2. Top trending stocks in the UK as measured by relative strength a week ago
|Sareum Holdings||SAR||£168.5m||Biotechnology & Medical Research||FTSE Aim All-Share|
|Scancell Holdings||SCLP||£138.6m||Biotechnology & Medical Research||FTSE Aim All-Share|
|Avacta||AVCT||£322.8m||Biotechnology & Medical Research||FTSE AIM 100|
|Renold||RNO||£60.3m||Machinery, Equipment & Components||FTSE Aim All-Share|
|4d Pharma||DDDD||£87.4m||Biotechnology & Medical Research||FTSE Aim All-Share|
However, keeping an eye on what stocks are trending does help me get a feel for what is going on in the market. If small-cap stocks are outperforming, then markets are in a risk-taking mood and are usually buoyant, at least for the moment. If one sector or industry is outperforming, I can research what broader themes might be lifting all those stocks and perhaps tumble onto something interesting that might hold in the long term.
Investors are buying these stocks
Another way to look for top trending stocks is to see which ones are popular with UK investors. Hargreaves Lansdown, an ISA provider and broker, lists the stocks its retail investors have been buying the most. This week, and indeed most weeks, they are all large-cap members of the FTSE 100 index. However, there is one that is a mid-cap member of the FTSE 250 index. All of them pay dividends.
Table 3. The five stocks retail investors are buying the most according to Hargreaves Lansdown
|BP||BP||£77.7bn||Oil & Gas||FTSE 100|
|Barclays||BARC||£24.4bn||Banking Services||FTSE 100|
|Witan Investment Trust||WTAN||£1.63bn||Collective Investments||FTSE 250|
|Shell||SHEL||£165.7bn||Oil & Gas||FTSE 100|
Stocks and Shares ISA investors have been loading up on blue-chip income stocks this week. The core of my own ISA is in similar stocks, and I reinvest the dividends I receive. I do have smaller allocations to more speculative stocks, like those that might crop up on a top trending stock screen based on relative strength. However, I won’t buy a stock for that reason alone.
Liquidity and volatility
It’s interesting to note that the stocks that investors are buying the most are not the ones seeing the most significant increases in their prices. Large-cap stocks have millions, sometimes billions of shares in issue. Even with reasonably heavy retail demand, the price is not budged too much by buying and selling alone: that is what is meant by a liquid stock.
With smaller-cap stocks, because the number of shares in issue is typically lower, the stock is considered illiquid. This means the actions of buying and selling can move the price of the stock substantially. So, when a small-cap stock is trending, I always consider if something fundamental is driving the move or it is just a lot of buying chasing the price of an illiquid stock higher.