Only two UK shares feature in the top 50 of Trading 212’s ‘Hotlist’ — its league table of the most popular stocks among its 4.5m clients.
Not surprisingly, top of the list is Nvidia, the world’s most valuable company. It’s currently (22 September) held by 613,752 of its clients.
Closer to home
But can you guess the two most popular UK shares?
They are Rolls-Royce Holdings (LSE:RR) and BP (LSE:BP.), ranked 11th and 22nd, respectively. And given their popularity, should I buy either (or both) of them?
The first thing to say is that following the crowd is never a sensible investment strategy.
For example, it’s impossible to know how much research the 218,918 clients of Trading 212 have done into Rolls-Royce before buying the aerospace and defence group’s stock. There’s no substitute for doing your own homework. However, lists like these are a good way of identifying potential investments.
As it turns out, I already hold both these stocks. And despite what I said earlier about copying others, I always find it reassuring to know that I’m not alone in having them in my Stocks and Shares ISA!
Flying high
After a five-year rally, Rolls-Royce shares are now one of the most expensive on the FTSE 100. And its dividend isn’t very generous.
But as long as it continues to grow its earnings, this can be justified. However, any sign of a slowdown and its share price will – I fear – see a sharp pullback.
But there’s no sign of a cooling yet. When unveiling the group’s interim results for the six months ended 30 June, it announced an earnings upgrade. Efficiencies and successful contract renegotiations helped boost its civil aviation division. Power systems benefitted from additional data centre demand. And new contracts with the UK’s armed forces helped lift its defence business.
Looking further ahead, the group wants to fit its engines to narrowbody aircraft. It also hopes to commercialise its factory-built mini nuclear power stations. In my opinion, these could transform the size and scale of the group, although not until the 2030s.
Overall, Rolls-Royce looks to be in good shape to me. That’s why I think it could be one to consider.
Untapped potential
As for BP, brokers have a 12-month share price target of 460p. This is approximately 9% higher than today’s value. However, given how volatile energy prices impact the group’s earnings, these ‘expert’ opinions need to be treated cautiously. Also, as an an oil and gas producer, it faces many operational challenges.
But I bought the stock for two reasons. Firstly, I was attracted by its yield. Based on dividends paid over the past 12 months, it’s presently offering a return of 5.7%. Of course, there are no guarantees this will continue.
My second reason for buying was my belief that the group is less efficient than some of its rivals. One of its largest shareholders, Elliott Investment Management, wants the group to cut overheads, dispose of its non-core operations and (to the understandable horror of environmentalists) focus more on oil.
In doing this, it reckons BP could generate free cash flow of $20bn in 2027. For comparison, in 2024, it was $12.5bn. And it appears as though the management team is listening.
On balance, I think it’s worth considering.
