Hargreaves Lansdown investors are buying Rolls-Royce shares. Should you buy too?

FTSE 100 (INDEXFTSE:UKX) broker Hargreaves Lansdown (LON:HL) lists Rolls-Royce (RR) as its second most bought share last week. Is this stock worth buying?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Rolls-Royce Holdings (LSE:RR) saw its share price shoot up over 25% yesterday on news of a pilot programme being brought in at Heathrow that collates traveller Covid-19 results. And the excitement continues today as it rose a further 28% at the opening bell.

This follows on from a surge in share buying witnessed by broker Hargreaves Lansdown (LSE:HL), listing Rolls-Royce shares as its second most purchased stock last week. It bases this on the number of deals placed by its clients on the Hargreaves Lansdown platform. A gradually rising oil price may also have boosted sentiment around the downtrodden stock.

Is Rolls-Royce a good investment?

Reopening borders and getting travel moving again is key to boosting ailing economies. It’s early days, but there’s hope a digital health ‘passport’ will help restore confidence in air travel. Volunteer travellers are trialling the passport, called ‘CommonPass’, by taking a Covid-19 test at a certified lab and uploading their results to the app along with answers to a health questionnaire. This is welcome news for Rolls-Royce as it desperately needs flights to resume, so it can start earning again. Its principal source of revenue comes from air miles flown on the engines it sells. This explains why the pandemic has had such a detrimental effect on its business. Unexpectedly, the Rolls-Royce share price is now enjoying a record weekly performance, up over 107% since Monday.

Is now a good time to invest in Rolls-Royce? It’s hard to say. I think it’s deeply ingrained into British industry, loved by the government and filled with a level of expertise and prestige that’s hard to find elsewhere. For these reasons, I don’t think it will go bust. However, the economy is still in a bad way, Covid-19 cases are rising rapidly, Brexit remains a thorny issue and the price of oil is uncertain. This makes me think the Rolls-Royce share price will face further volatility, and I’m not sure this is the best time to buy.

Hargreaves Lansdown benefits from a Covid economy

As an alternative FTSE 100 investment, I think Hargreaves Lansdown itself looks good. It has a price-to-earnings ratio of 23, its dividend yield is 3.5% and earnings per share are 66p.

It seems that Hargreaves Lansdown is benefiting from several unexpected avenues boosting its sign-ups this year. According to the Financial Times, there was a significant rise in 25 to 34-year-olds opening ISA and SIPP accounts during March and April. In the US, the lack of sporting events was reported to have brought sports gamblers to investing platforms. This may well have been the case in the UK too. Then National Savings & Investments cut interest rates and announced it would be slashing the prize-winning potential on its most favoured of retail products, the Premium Bond. Since then, Hargreaves Lansdown has witnessed a rise in new customers. This could well be some disgruntled Premium Bond holders looking for a more lucrative place to invest their cash.

Investing in shares via a broker such as Hargreaves Lansdown is a great way to take control of your financial future. Long-term investors can make an average annual return of 8%-10% through buying and holding quality shares for 10 years or more. That’s a major improvement on interest rate returns on traditional bank accounts. I think long-term investing is wise and shares in Hargreaves Lansdown look a good buy.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

More on Investing Articles

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »