It’s fascinating to see which UK shares other private investors are buying and selling. And trading data is sometimes a great source of ideas. But it doesn’t always pay to follow the crowd.
In this piece I’m going to look at three stocks that were heavily sold last week by clients of DIY investment platform Hargreaves Lansdown (LSE: HL). Oddly enough, Hargreaves shares were on the list, so let’s start with a look at the latest from this FTSE 100 firm.
Sell Hargreaves? No thanks
Hargreaves Lansdown has never been a cheap share, but the firm’s performance has justified a premium rating over many years. I don’t see any obvious reason for this to change.
Despite the stock market crash in March, the company traded well through the first half of 2020. Client numbers rose by 94,000 during the four months to 30 April, and by a further 44,000 in May and June.
Hargreaves’ financial results backed up this growth. Assets under management rose by 5% to £104bn, despite the effects of the market crash. The group’s pre-tax profit rose by 24% to £378m last year, while the dividend was lifted 31% to 54.9p per share.
The shares may seem pricey on 30 times forecast earnings. But for a business with a market-leading position and an operating profit margin of 68%, I think the price is fair. I’d rather be buying than selling.
This UK share could be a box office flop
Cineworld Group (LSE: CINE) has been one of the biggest casualties of the lockdown. Of course, all cinema chains were affected equally in terms of closures. But Cineworld’s heavy debt load means that in my view, the business now looks quite fragile.
Investors appear to agree. The Cineworld share price has fallen by more than 70% this year. One concern for me is that I feel Cineworld’s management has been a little vague about the group’s financial situation since lockdown.
My analysis of the numbers that are available suggests that the company’s debt levels are unlikely to be sustainable without some kind of refinancing.
Cineworld’s half-year results are due towards the end of September. These should provide a clearer picture.
Until then, I’d avoid this stock. Although the cinema group’s shares may look cheap on five times forecast earnings, I don’t think they’re worth much more at the moment.
US tech giants are powering this UK share
The last stock I want to look at is a little different. Scottish Mortgage Investment Trust (LSE: SMT) sounds pretty dull and worthy. But the SMT share price has risen by more than 60% this year, thanks to the trust’s holdings in US tech giants such as Tesla, Amazon and Netflix.
If that isn’t enough growth for you, SMT also holds shares in Chinese tech stars such as Tencent and Alibaba. It’s a focused portfolio that’s performed well for investors over many years. A £1,000 investment in SMT back in August 2000 would be worth £10,000 today.
Can this continue? There’s no doubt that SMT has a track record of picking long-term winners from the US tech market. Although I think we’ll see a correction at some point, I wouldn’t bet against the trust’s continued growth.
My view on Scottish Mortgage Investment Trust is neutral, but I’d consider selling if I needed to cash in some investments.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon, Netflix, and Tesla. The Motley Fool UK has recommended Hargreaves Lansdown and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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.