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Investors buy Rolls-Royce shares but turn cautious on Tesla, says eToro

Roland Head
·4-min read
A bull outlined against a field
A bull outlined against a field

The number of investors buying shares in Rolls-Royce Holdings (LSE: RR) rose by 319% in October, according to the latest data from investing platform eToro. The jet engine maker was the eighth most popular stock on eToro last month, up from 36th position in September.

At the same time, long-running favourite Tesla was pushed off the top spot by a rival firm, despite the pioneering US firm reporting record quarterly sales.

My analysis of the top 10 stocks on eToro suggests investors are focusing on big fallers in their hunt for shares to buy. I’ve been taking a closer look to find out more.

Rolls-Royce shares: turnaround opportunity?

Trading in Rolls-Royce shares rose by 319% on the eToro platform in October. This put the firm in at number eight in terms of trading activity, up from 36 the previous month.

The catalyst for the increase in trading appears to have been the jet engine maker’s £2bn rights issue. My colleague James McCombie covered this in more detail here and explained why Rolls’ share price has been so volatile recently.

The whole aviation sector has been battered by the pandemic slump in international flying. It’s not yet clear how long it will take for air travel to recover, but the industry view seems to be that it could take until 2023 for air traffic to return to 2019 levels.

Rolls-Royce shares hit an all-time low of 35p on 2 October. The share price has doubled since then, suggesting that some investors who bought in October may have done quite well on the trade.

So what else have eToro clients been buying?

New opportunities in electric cars?

Investors still seem to be focused on the growth potential of the electric car sector. The two most-traded stocks by eToro customers last month were Chinese firm Nio and its US rival Tesla.

Nio took the top spot with a 50% increase in trading activity, while Tesla slipped to second as trading levels fell by 55%. Tesla’s share price has also slipped over the last month, dropping 10% despite selling a record number of cars during the third quarter. By contrast, Nio stock has risen by 55% since the start of October.

eToro analyst Adam Vettese thinks that “the US government’s delay in agreeing a fresh coronavirus stimulus package” may be acting as a drag on Tesla stock. By contrast, Mr Vettese says that Shanghai-based Nio has already enjoyed $1bn of Chinese state support.

The electric car industry is still young. But with competition growing from new players and established car manufacturers, I think it’s going to be an interesting sector to watch over the next few years.

Don’t give up on tech

Tech investors on eToro were buying up several big fallers last month, while pulling back from some of this year’s biggest winners. Content delivery platform Fastly saw a 357% increase in trading in October, while trading in chipmaker Advanced Micro Devices (AMD) rose by 40%.

Over the last three months, AMD and Fastly have both underperformed bigger tech names such as Apple, Microsoft, Amazon, and Facebook. Trading in these heavy hitters eased at eToro last month, suggesting to me that investors may be looking for relative value opportunities in the tech sector.

The post Investors buy Rolls-Royce shares but turn cautious on Tesla, says eToro appeared first on The Motley Fool UK.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, 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, Apple, Facebook, Fastly, Microsoft, and Tesla and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, 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.

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