Monitoring the most popular buy lists among online brokers can be a useful way of gauging market sentiment about where the bargains lie. Today, I’m looking at what appear to be two cheap FTSE 100 shares that have been on the shopping lists of clients at investment platform Hargreaves Lansdown and wondering whether I should ‘follow the money’.
In demand
Third on the list of most popular buys last week was mining behemoth Rio Tinto (LSE: RIO). This isn’t hard to fathom. Mining is one of the few sectors to do well in 2022 so far. A strong post-pandemic recovery in the global economy coupled with concerns over supply shortages as a result of the war in Eastern Europe has pushed up prices of many of the metals it digs for.
Whether Rio stays in demand is up for debate though. We could see a sharp dip in orders for precious metals, particularly from China, in the event of a recession. In such a scenario, earnings at the world’s second-largest miner, not to mention its share price, could be hit.
Massive dividends
On the other hand, the potential for a commodities ‘supercycle’ thanks to the renewable energy boom may see investors sticking around. Whatever happens in the near term, huge amounts of copper and lithium will be needed in the next decade and beyond.
I can also see the appeal for investors wanting to generate passive income. Although it’s expected to reduce in FY23, analysts have the company yielding an incredible 13.5% in 2022. This makes Rio the biggest-paying top-tier stock right now.
Long-term dip
The other cheap FTSE 100 stock that was proving popular last week is HSBC (LSE: HSBA).
Like Rio, the UK-listed financial giant has performed relatively well in 2022 to date. At last Friday’s close, the share price was 6% up since the beginning of January and 13% from 12 months ago. That’s despite Covid-19 continuing to cause havoc and the aforementioned Russia-Ukraine conflict.
As a fully-signed up Fool, however, I’m compelled to look at the long-term picture. Unfortunately, HSBC’s value has declined by a quarter since May 2017.
Good for income
Having said this, there are certainly reasons for thinking that now might be a good time to load up. Rising interest rates should mean higher profit for banks.
The valuation is also pretty attractive, at least compared to the rest of the FTSE 100. While a recession tends to be bad news for anything in the financial sector, HSBC’s current P/E of 9 suggests some of this negativity is already priced in, even if this is higher than peers.
The income is also compelling. A 4.4% dividend yield may be far below that offered by Rio but it’s higher than the index as a whole (3.8%). It’s also set to be covered over twice by profit. This makes it very secure, in my opinion.
My verdict
On balance, I can see why many investors have been adding these cheap FTSE 100 shares over recent days.
As someone more focused on quality growth companies, however, my first choice from the top tier would probably be Scottish Mortgage Investment Trust. Funnily enough, this topped the Hargreaves Lansdown buy lists last week (although it was also the most popular sell).
