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Twitter storms ahead as meme stocks fade

Twitter climbed hundreds of places to become the 2nd most popular stock in April following Elon Musk’s deal for Twitter, according to Freetrade’s monthly Retail Investor Barometer.

In fact, both the top two positions were connected with Musk, as Tesla maintained its position as the most bought stock on Freetrade’s platform.

Rolls-Royce joined fellow UK companies Legal & General and Lloyds Banking Group among the most popular stocks as Defence, Aerospace and Financial Services continue to be favoured by retail investors.

Additional key findings are:
Vanguard’s S&P 500 trackers remained the most popular ETFs among Freetrade users
Outside of the 15 most-bought stocks, oil majors and companies with pricing power, such as Coca-Cola, continued to draw the attention of retail investors to counter inflation.

Commenting on the findings, Freetrade’s Senior Analyst Dan Lane said:

“Musk usually reserves Twitter for a light-hearted meme or two but it looks like investors were right to take him very seriously on the platform in April. Given the value he has created at Tesla, Freetrade customers clearly thought that his passion would be too hard to resist for the Twitter board and sent the stock soaring up the list of top buys.

“With Netflix plummeting on some disappointing user numbers and a rather gloomy outlook, long-term investors and those with the stock on the watchlist pounced on the stock during the month. There’s likely to be a good deal of opportunism on show here and if the next few quarters don’t turn out to be just as bad as first thought, it might end up being a shrewd move.

More broadly, tech’s taken a big hit on the back of rising rates in May but investors are clearly willing to stick with the firms dominating their space. It’s making less and less sense to group all big tech together though, and while some struggle to keep customers on board, others might just be demonstrating pricing power before our eyes. It was Microsoft’s CEO Satya Nadella that puffed his chest out a few quarters ago and proclaimed “in an inflationary world we sell deflation”. 2022 will put that to the test.

“Tesla’s still top of the pile though, and despite other big carmakers showing progress in the EV game, it’s clear Musk’s firm is still head and shoulders above the rest where the market is concerned. But the most diehard Tesla investors aren’t glued to quarterly production volumes the way everyone else is. For them, Tesla represents the goal of a complete change in how we use energy, it just happens to be tackling cars at the moment. So, while some investors will baulk at the high valuation, for others the real value is just beginning to show.

“However, Musk’s attention is bound to be split following the Twitter offer. And, with no immediately obvious value-add for Tesla shareholders, they can only lose part of Musk’s focus and gain nothing for now. Granted, we don’t know how involved Musk plans to be but, at what feels like an inflection point, with the war in Ukraine bringing into sharp view the need to push further into renewables, Musk could be about to instead leap into the biggest vanity project the world has ever seen.

Game over for meme stocks?

In contrast to Twitter’s ascent, meme stocks lost favour among retail investors. In fact, Gamestop (GME) had one of the lowest buy to sell ratios* of any stock – with the value of sales 26% higher than the value of orders among investors buying the bricks and mortar retailer.

Dan added:

“There’s still a distinct tech feel among April’s top buys but it looks like investors have got a bit tired of the meme stock narrative. With the whole episode looking quite old now and players like GME actually having to execute on their plans, investors are clearly re-examining the actual base cases and finding more attractive options elsewhere.

“There may still be some weird and wonderful propositions that catch the headlines, like GME’s upcoming NFT marketplace, but for their long-term holdings investors are thinking about the firms who can fire on all cylinders just by doing what they’re good at.”