2 blue-chip FTSE 100 shares Hargreaves Lansdown investors have been buying in the market sell-off

When global markets were in meltdown mode, Hargreaves Lansdown investors recently piled into these two well-known FTSE 100 names.

Edward Sheldon, CFA

Based in London, Edward is a CFA-qualified investment analyst/writer who has clients all over the world. Before launching his own investment writing business in 2017, he spent 15 years working in private wealth management and institutional asset management. Edward takes an active approach to investing, managing his own individual stock portfolio. He likes to invest in high-quality companies that are poised to benefit from powerful long-term trends, and capable of generating market-beating returns. You can find more of his views, along with his portfolio holdings, at topshelfinvestments.substack.com

Published 16 April, 9:54 am BST

| More on: LGENRR.

I always keep an eye on the list of the most bought shares at Hargreaves Lansdown. It can be interesting to see what other investors are buying, especially during periods of turbulence. Last week, when volatility was high, Hargreaves Lansdown investors piled into two blue-chip FTSE 100 shares. Should I follow the crowd and buy these stocks for my own portfolio?

Buying the dip

The most bought stock on the platform last week – by both value of deals and number of deals – was Rolls-Royce Holdings (LSE: RR.). It made up 4.2% of the total value of all deals.

I can see why investors have piled into this stock. In recent years, it’s been the best performer in the FTSE 100 by a mile. However in the last month or so, it’s experienced a sharp pullback on the back of tariff uncertainty. Investors have clearly seen an opportunity and been buying the dip.

Now, there are a lot of reasons to be bullish on Rolls-Royce. For starters, there’s the amazing turnaround by CEO Tufan Erginbilgiç – he’s managed to increase the company’s profitability significantly.

Then, there’s the company’s defence exposure. With European countries set to spend hundreds of billions on defence in the years ahead to protect themselves (and others), Rolls-Royce is well positioned to capitalise.

At the same time however, there are a few risks to consider here. One is tariffs and supply chain issues, which could slow growth and hit profitability. Another is a potential slowdown in the civil aviation market (Rolls-Royce generates a lot of its revenues from the servicing of engines). This could occur if economic conditions weaken.

The issue for me is that the valuation doesn’t really leave much room for error. Currently, the forward-looking price-to-earnings (P/E) ratio is about 30. Given that lofty valuation, I’m going to pass on this stock for now.

Grabbing a huge yield

Next, we have Legal & General (LSE: LGEN). It was the second most bought stock by number of deals and the third most bought by value (2.7% of all deals).

Again, it’s easy to see why investors have been buying here. This stock’s one of the highest dividend yields in the FTSE 100, and last week the yield climbed to around 10%.

I’ve owned this stock in the past, and I’ve collected plenty of income from it. But I’m not in a rush to buy it today. There are two reasons.

First, I’m getting a little concerned about the sustainability of the dividend payout. Dividend coverage (the ratio of earnings to dividends) is now very low and the very high yield suggests that institutional investors have their doubts about the payout in the long run.

Second, I’m a bit concerned about recent volatility in the bond market. If this continues and bond yields rise, it could spell trouble for insurers like Legal & General (as the bonds on their balance sheets would be worth less).

Of course, this stock could go on to provide solid returns from here given the current yield, so it could be worth considering. Personally though, I think there are better shares to buy for my portfolio.