There’s wisdom in crowds, or so it’s said. So what can we learn from the trading patterns of investors at Hargreaves Lansdown? The FTSE 100 firm is the UK’s largest DIY investment platform, with more than £100bn of assets under management. Much of this is invested in UK shares.
Today, I’m looking at three of the more heavily-traded stocks on the platform over the last week. Should we be buying these popular growth shares too?
BOO! A super growth stock
The Boohoo Group (LSE: BOO) share price has bounced back quickly from the July slump, triggered by allegations relating to Leicester sweatshops. I admit I took a more cautious approach after the news emerged, citing Warren Buffett’s view that “there’s never just one cockroach in the kitchen.”
Judging from the market reaction to Boohoo so far, I may have been wrong. The company has launched an independent investigation. Management appear to be committed to clearing up any problems in Boohoo’s supply chain.
Meanwhile, there’s no sign of any slowdown in the group’s earnings growth. Analysts expect earnings per share to rise by around 40% this year and by a further 31% in 2021/22. Although the shares trade on 40 times forecast earnings, I think they could have further to run. This is one UK growth share I’d keep holding .
Amigo: heading for disaster?
I’m less confident about the outlook for shareholders at Amigo Holdings (LSE: AMGO), which was a top buy among Hargreaves Lansdown clients last week. This finance company specialises in guarantor loans, but is currently in trouble.
Amigo seems to have two main problems. The first is that it’s operations aren’t making much money. This is due to a surge of regulatory complaints which cost the group £127m last year — nearly half its revenue. New lending has been suspended until these issues are resolved.
The second problem is that Amigo’s board is involved in a long-running argument with founder and former CEO James Benamor about the operation of the business. Benamor left the board in March but remains a significant shareholder.
The Amigo share price has fallen by around 95% since its flotation in June 2018. This suggests the market shares my concerns about the outlook for this business. Although Amigo may recover, I think there’s a real risk it won’t survive. As such, this is one UK share I’m avoiding.
This UK share is up 1,200% in a month!
At the time of writing, the [email protected] Capital (LSE: SYME) share price has risen by a staggering 1,200% in one month. Surely that’s worth buying?
I have to say this is the last stock I’d buy from the three UK shares I’ve featured today. The group’s business model involves allowing companies to monetise their inventories using peer-to-peer funding. But as far as I can tell, [email protected] Capital hasn’t yet secured any funding for its 97+ clients. As such, I think this stock’s £255m market-cap is hard to justify.
I have other concerns too. Around 75% of the stock is controlled by a group of related parties. This means outside shareholders are unlikely to have much influence on events.
In short, I think [email protected] may turn out to be all hat and no cattle. Until I see evidence of successful funding and completed financing transactions, I view [email protected] as a stock to avoid.
Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.