The FTSE 100 stayed pretty flat over the past week, but BP (LSE:BP) and Rolls-Royce (LSE:RR) were the two most-bought stocks on Hargreaves Lansdown‘s popular investment platform — the most popular by some distance.
Both stocks were among the most bought in the previous week as well. So, why are investors buying these two companies? Let’s explore.
BP stock falls and retail investors swoop
BP stock tanked last week despite the stock representing 4.79% of share purchases on the Hargreaves Lansdown platform. Seemingly, while other market forces — including funds and institutional investors — were putting selling pressure on the oil firm, retailer investors saw an opportunity.
Shares in the energy giant fell as Brent Crude and WTI oil prices pushed lower, impacting BP’s profitability as a heavily indebted vertically integrated energy firm.
However, I’ve been saying for some time that I’d consider buying BP shares if there was a clear entry point or buying opportunity. The stock is now down 27.9% over 12 months and the dividend yield has pushed up to 5.8%. This could be the entry point other investors were waiting for.
Energy and oil are inherently volatile markets, and this means BP’s long-term share price trajectory isn’t typically linear. However, with increasing competition for increasingly sparse hydrocarbon resources, you can see why many investors are bullish on oil companies for the long run.
BP is always an interesting one, trading at a discount to its American peers and Shell but at a premium to Total and Eni. We can’t put the discount completely down to debt — BP still has a large debt pile due to the Deepwater Horizon disaster — as it trades at a discount on an EV-to-EBITDA basis too.
Investors split over Rolls-Royce
Rolls-Royce has surged 658% over the past 24 months. However, at the current price, it’s still splitting investors as highlighted by the fact that it was the second most-purchased stock and second most sold last week.
Everything has been going right for Rolls-Royce since Tufan Erginbilgiç took the helm in January 2023. Civil aviation is booming, supported by efforts to make the unit leaner, and the defence order book has been growing on the back of increased global conflict.
Moreover, the company recently received an additional boost after being named as the preferred supplier to build small modular reactors for the Czech State utility company, ČEZ Group.
It’s a new part of the Rolls business, and it’s losing money hand over fist, but the Czech announcement reinforces the notion that the UK company really is leading the pack in a new sector that could be worth $295bn by 2043.
However, to some, this stock is simply overbought, trading at over 30 times forward earnings. The pandemic also revealed that it was overly reliant on its civil aviation business.
