If any of us need evidence that markets are bullish, take a look across the pond. On Tuesday, the Dow Jones Industrial Average rose above 30,000 for the first time. What’s more, at least some of this can be attributed to buyers on these shores. Here are the most traded US stocks by UK retail investors in the last week, according to trading platform Stake.
US stocks go electric
Thanks to its forthcoming inclusion in the S&P 500 index, it’s no revelation that electric car maker Tesla makes the list.
Having now posted more than the four profitable quarters required to make it eligible, Elon Musk’s California-based giant gets its promotion on December 1. Institutions operating index-tracking funds will be obliged to buy the stock. And canny investors know that. This should push the share price higher, at least for a while.
But UK investors’ desire for electric vehicle stocks goes beyond Tesla. Manufacturers Nio and Workhorse make the list of the most popular buys, as do US-listed Chinese equivalents Xpeng (or Ziaopeng Motors) and Li Auto. Interestingly, Canadian car designer ElectraMeccanica was the most popular stock traded by UK investors over the past week.
Another in-favour share has been Plug Power. The $11bn cap makes hydrogen fuel cell systems that replace conventional batteries in vehicles such as trucks and equipment used in warehouses. Its shares have climbed an incredible 700% in 2020 alone.
A second popular alternative power buy in the last seven days has been FuelCell Energy. It designs, manufactures, operates and services fuel cell power plants.
With the push to green energy sources likely to play a significant role in Joe Biden’s presidency, it’s understandable that UK investors should gravitate to companies like these.
Also in the mix
The remaining two stocks in the Top 10 list offer a bit more variety.
Small-cap biotechnology firm Vaxart is currently developing a coronavirus vaccine that can be administered orally. Assuming it’s clinically effective, a big positive is that it won’t require cold storage, making the vaccine relatively easy to distribute. Vaxart may be running behind other candidates on results, but that doesn’t seem to be deterring UK investors from buying.
The final share that made the list in the last seven days was GoPro — the leading manufacturer of action cameras and video-editing software.
Should I buy?
Here at the Fool UK, we’re not the sort to buy shares in companies just because they’re popular. Sentiment can turn quickly. So any strategy based purely on momentum is inherently risky. Moreover, the valuations attached to some US stocks now look crazy. Tesla is a prime example.
This is not to say we think owning shares in businesses listed overseas is a bad idea. Quite the opposite, in fact. Diversifying a portfolio to include these stocks can help protect UK-based investors from events closer to home.
It can also lead to better returns. While US markets have soared since markets crashed in March, the FTSE All-Share is still down around 15% in 2020. Buying London-listed firms feels safe, but this ‘home bias’ can prove a drag on profits.
Lastly, it’s a fact that most of the major players in ‘megatrends’ such as the move towards automation, healthcare innovation and, yes, electric cars, are listed overseas. As a long-term investor, I think getting some exposure is vital.
Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. 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.