Buy the Dip lives

Buy the Dip lives – Saxo’s May client trends report by Neil Wilson

• UK clients favouring US mega-cap names: Alphabet, Amazon, Berkshire Hathaway
• Rolls-Royce momentum held: 58% buy trades amid 10% rally while Marks & Spencer saw dip buying post-cyber attack and Shell remained strong favourite: 80% buy trades
• Vodafone, easyJet and Barclays sold as clients took profits (Barclays up 10% in May, 20% YTD)
• Equities sentiment positive, but gold still in demand: 60% buy trades on iShares Physical Gold ETC

Sell in May? It turned out to be a month generally marked by recovery and consolidation after the bounce back from the April lows. Retail clients continued to buy the dip in equities and remained undimmed in their optimism despite mounting pressure from bond markets and hedge funds going short.

Among individual stocks we saw buying by UK retail clients of US assets, with strong interest in Alphabet, Amazon and Berkshire Hathaway in particular, as investors snapped up the stock after Warren Buffett’s decision to retire presented an attractive short-term entry point. We also saw heavy interest in UnitedHealth, with investors trying to pick the bottom as shares of the healthcare stock plunged.  Eli Lilly and Super Micro Computer were among the other favourites.

Among chipmakers clients remained net buyers of Nvidia, just, at 51% buys. Clients seemed more positive on AMD at 61% buys. Among favourites Tesla and Meta clients were sitting on the fence at 50% buys and sells.

Quantum computing stocks were also in vogue, led by a surge in D-Wave Quantum after its strong earnings update. Rigetti Computing also attracted net buyers (60%), as did Palantir (56%).

Microsoft was among the most sold shares on the platform with just 39% of trades a buy. Hims & Hers was also sold after a rally of over 100% saw profit taking.

In the UK specifically, momentum in Rolls-Royce continued with clients remaining net buyers at 58% long to ride a 10% rally in the stock, while Marks & Spencer rose in popularity after a cyber attack attracted dip buyers and its earnings suggested a strong performance in the core businesses. Shell was also a strong favourite at 80% buy trades. Clients were net sellers of Vodafone and easyJet, both of which reported this week, while Barclays was sold by retail investors as they sought to take profits on a 10% rally over the month and 20% YTD gain.

Although investors remained positive on equities generally, clients continued to hedge into gold with 60% buys on the iShares Physical Gold ETC in May.

In the ETF space we saw continued retail dip buying with a strong 69% and 76% buy trades on our two most popular S&P 500 Vanguard ETFs.

Among the traders, clients were short the Dow Jones on UnitedHealth’s decline and long Australia and France. In FX, they were mildly long the euro and short sterling and very marginally long dollar against sterling on a proportion of client trades.

Neil Wilson is Investor Strategist at Saxo UK