Investor appetite has caught fire across the London Stock Exchange at the start of 2023. Here are two UK stocks that share pickers using Hargreaves Lansdown have piled into over the past week.
Both of these British shares can be found on the FTSE 100. Should I add them to my own investment portfolio?
Glencore
Commodities giant Glencore’s (LSE: GLEN) share price has torn higher in New Year trading. Yet at current prices the business continues to offer excellent all-round value.
This perhaps explains why it’s the second most-bought UK stock on Hargreaves Lansdown’s platform in the past week. The miner and trader has accounted for 1.38% of all buy orders.
Today Glencore shares trade on a forward P/E ratio of 8.4 times. It also carries a hefty 6.2% dividend yield. These numbers are prompting me to consider adding the stock to my own shares portfolio.
The near-term outlook for firms like this one is uncertain as the Covid-19 crisis in China endures. Future lockdowns remain a possibility that could hit raw materials demand from the world’s biggest commodities importer.
But when I have some spare cash, I’d buy Glencore in expectation that its share price will soar in the years ahead. The business could generate huge profits as factors like the green energy revolution and massive city building in emerging markets drive demand for its copper, iron ore and other key industrial metals.
Citi analysts, for example, think that decarbonisation schemes will drive 70% of copper consumption growth through to 2023.
Rolls-Royce
Rolls-Royce (LSE:RR.) is another FTSE index stock whose shares look dirt cheap right now. The engine maker trades on a price-to-earnings growth (PEG) ratio of just 0.1 for 2023.
Rolls-Royce is the third most-bought UK stock by Hargreaves Lansdown customers in the past seven days. It has accounted for 1.26% of all buy orders. This is probably on account of its improving earnings forecasts.
City brokers now expect earnings here to soar almost 480% year on year in 2023. Another 75% increase is expected in 2024 as the airline industry enjoys a sustained recovery.
I believe there are big risks to current estimates, however. The outlook for travel demand remains highly uncertain as the world economy splutters. Activity at Rolls’ engine servicing operations could disappoint while reduced airline profits could also hamper new engine orders.
The company is also battling to generate profits in an environment of elevated costs. Olivier Andriès, CEO of industry rival Safran, said that “persistent supply chain disruption and rising inflation” remained a problem for the aerospace industry in an update late last year.
My worries for Rolls are compounded by the firm’s huge debts. It had undrawn debt of £4bn as of September. A failure to generate meaningful profits will compromise its efforts to pay this down.
Some stocks are cheap for a reason. And while Rolls-Royce’s share price looks cheap I still think it poses too much risk for me today.
