The madness of crowds? Why you should avoid Hargreaves Lansdown's most traded stocks

Tuesday, Aug 20 2019 by
The madness of crowds Why you should avoid Hargreaves Lansdowns most traded stocks

Hargreaves Lansdown is one of the UK’s biggest investment brokers - and like other platforms, one of its eye-catching pages is its "Top of the Stocks" feature. You may have perused lists like this for interest or even made investment decisions off the back of them. But have you ever considered what lists like these really tell you - and whether they’re a route to easy profits or painful losses?

Lists of the most viewed, most bought, and most sold stocks can instinctively feel like a useful guide to what’s hot in the market. But our research shows that far from being a useful short-cut, these lists are right to carry very serious wealth warnings…

Hargreaves’ homepage reveals the top 5 most viewed shares and just one click away you can find the top 10 most viewed shares. This may seem innocent enough, and perhaps even very useful. After all, given the concept of the wisdom of crowds, the top 10 most popular shares could easily feel like somewhere you should be focusing your attention.


Well, that’s where you’d be wrong. Upon seeing this list, there are three actions you could realistically take.

1. You might trustingly decide to buy these stocks, rationalising that they should perform well as they might have strong momentum. You may reasonably think that you can even combat poorly performing stocks on the list on any one day by adjusting your portfolio quarterly or even weekly. Yet my research shows that even this will not be able to save you from poor portfolio performance.

Using the top 10 lists dating back six years, I have created a portfolio of these stocks and updated it quarterly (in January, April, July and October), graphing the performance in comparison to the FTSE All-Share Index. Both are given a base investment of £100,000 and rebalanced quarterly as and when there is new data on stocks. As demonstrated, such a portfolio would significantly underperform the FTSE All-Share Index.


2. You might decide to do some research to determine whether or not the stocks are worth the hype. Perhaps you think there must be some reason for the popularity of these stocks and know to do your research before investing. Investors should, on the whole, be smart and rational. However, given the data I’ve collected…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.

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33 Comments on this Article show/hide all

zoefuji 20th Aug 14 of 33

In reply to post #506066

Definitely; thanks for this additional insight!

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zoefuji 20th Aug 15 of 33

In reply to post #506096

Thank you! I agree with you; the way I constructed the portfolios was taking a historic date, say the 9th of October 2016, and looking at what stocks HL had on its top lists on that day then using historic data calculating how the stocks from those lists performed until the next date I checked HL’s lists. In essence, I’m not testing stocks promoted today against historic data but stocks promoted historically against the relevant historic data.

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wilkonz 20th Aug 16 of 33

Great piece of research. Thanks Zoe. Although to be fair to HL if you move across to the top 'most looked at' funds, Lindsell Train Global is number one on the list so they're better at highlighting funds than shares (so long as one overlooks their recent predilection for Neil Woodford...)

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Fyberspates 20th Aug 17 of 33

Really interesting, thanks Zoe :)

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Gromley 20th Aug 18 of 33

Hi Zoe,

  A fascinating piece of research, thanks for your hard work on this.

 The main takeaway from this, that this lists should be used with great caution (if at all), is a good one.


However I draw some very different conclusions on some of the more detailed points.

The most viewed list

You characterise the most viewed list by observing that nearly 25% have a Speculative or Highly Speculative risk rating, an average F-Score of just above 5 and an average StockRank of merely 60.5.

But, consider this :

  • The market as a whole has 40% of stocks classed as speculative or highly speculative, so this list is (historically) less volatile than the market as a whole.
  • The average F-Score for the market seems to be around 5 (although this presumably can fluctuate over time) so the list is either average or slightly better than average in this regard.
  • By definition the average SR for the market is 50, so again  the list is better than average,

So the list manages to select a group of stocks that are slightly better than average (on the scores) and yet manages to significantly underperform the market over the test period – why should this be?

One conclusion could be that, the interest of the masses in these stocks, tends to mean that the price is over inflated at the time of initial observation – there may well be something in that.

However, I would conjecture that stocks often make this list (most viewed) because they have experienced some profound news (either positive or negative). If so I would expect there to be a much wider spread of outcomes (big gainers and big fallers) than the market as a whole. It would certainly be interesting to see if the data bears this out.

Performance versus the market has certainly been very volatile. There was substantial out-performance in late 2013 / early 2014, followed by significant underperformance later in 2014. (How much of this difference is driven by the outliers?)

By early 2016 there wasn’t much to choose between the list and the market in terms of cumulative performance, in fact the first three years look to be nothing but random. The list has done poorly since, but particularly in the last 12 months – is there a particular factor driving this?

Most bought and most sold lists.

 It does not surprise me much that the most bought shares have underperformed the market (and that looks to be fairly consistent over the period)

More interesting perhaps is that the most sold stocks pretty much tracked the market until mid-2017, but have dramatically underperformed in the last two years. IE the masses were selling fairly randomly early in the period, but have recently ‘learned’ to sell the right stocks (but still buying the wrong stocks) . Again it would be interesting to understand if this is just random chance, if outliers drive the average or if there is something else we could learn from.

I do not think the fact that 45% of the buys and sells are from the two most volatile categories is particularly meaningful given that the market average is 40%.

Neither does the distribution of StockRanks styles look particularly profound. Across the market as a whole the distribution between winning styles, neutral styles and losing styles is roughly in thirds and both the buy and sell lists match this pretty closely.

So whilst it may seem intuitive that “if investors had used Stockopedia’s website to research the StockRank Styles of the stocks in these lists, they could have easily avoided investing in badly performing shares.” I would not take that for granted as a fact. I do not dispute that the StockRank styles are predictive across the whole market, it should not be assumed that this automatically applies to a subset – it may even be that the SRs ‘interact’ with investor sentiment actually produce perverse results.

Rather for me the take-out would be to totally ignore these lists (in fact probably never look at them in case you are subconsciously influenced) and simply use the StockRanks to characterise.  The one exception to this might be to routinely avoid the “most bought” stocks as they do look to systematically underperform.

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cafcash49 20th Aug 19 of 33

Zoe, clearly a lot of work has gone into this and I thank you for it. It proves once again that the formula has to be Quality, Value and Momentum which results in a high stock rank. I think we all make life difficult for ourselves searching for the elusive best shares to buy now when the Stockopedia algorithms have crunched the data for us. Thank you again. When will I learn to accept the stock ranks and spend less time at my computer and spend more time enjoying myself on the golf course?  Charles

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AugustusKing 20th Aug 20 of 33

In reply to post #506226

In that case I totally was missing the point :-) Thanks for clarifying. Good blog!

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donald pond 20th Aug 21 of 33

In reply to post #506066

It is also interesting that £BUR appears top of the list of shares being sold, whereas I just happened to look at IG this evening and see that 96% of investors in £BUR are long. Whether that indicates a change in sentiment in the days between the above and today or, possibly more likely, that IG users have a different approach to HL investors, who knows.

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Nicholas Fordham 22nd Aug 22 of 33

There is no information on Stockopedia on market strength, positioning and innovation/R&D. So if you want to trash these top bought/sold lists I suggest you drop your momentum screen and concentrate on financial, economic and market fundamentals - this would make Stockopedia extremely valuable as a tool.

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andyfwwrench 22nd Aug 23 of 33

The emotional investor would rather buy a new low than a new high, except for after a long period of out performance where Fear Of Missing Out kicks in.  The emotional investor will tend to sell at a new high, and potentially buy back higher, generating further momentum. The emotional investor will tend not to sell losers until the point of maximum despair. They might even refuse to take a loss at all. The emotional investor will fold a recovery at their break even. Finally the emotional investor loves a good story, especially one that involves them getting richer.

What doesn't help the London market, and thus the UK investor generally blind to the rest of the world, is the paucity of genuine secular growth companies; were they to exist the buy lists would probably look somewhat better, perhaps showing a high beta rather consistent awful performance.

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Peter Craven 22nd Aug 24 of 33

The list published by Hargreaves Lansdown are as much use as a chocolate tea pot.
Further, the research published by Hargreaves Lansdown is superficial and targeted at zombie investors.
The only technique for identifying shares to buy and those to sell has to be factor based and based on comparison of different stocks.
The reader is strongly advised to refer to Charlie Munger's Investing Principles Checklist as available on the Stockopedia web site.

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ambrosia 22nd Aug 25 of 33

In reply to post #506991

have you ever read thinking fast and slow, it talks about anchors, if a company is well below a previous price it maybe cheap or it maybe a deteriorating crap stock.

To break free of anchoring is really hard to do, shops do it all the time in their 'reduced from' promotions (30% off 60% off etc), it gets your attention, the product wasnt worth it at the original price and still may not be at the reduce price but you find yourself comparing the two prices and nothing else

I fell for it before reading the book, I brought Mulberry based on its blown out price, however since i did its done sod all, i think i've fallen for the anchoring bias

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Edward Croft 22nd Aug 26 of 33

In reply to post #506966

@Nicholas - yes there's a lot of factors we can continue to add, and do have plans to add. 

Odd though to associate most bought/most sold with the momentum factor.  Momentum is the strongest anomaly in finance... and it's outperformed the more pure 'fundamental' factors Quality and Value since inception. 

The below is based on annual portfolios across the deciles... it's a few weeks old. 

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AimInvestor85 22nd Aug 27 of 33

Great piece of analysis, thanks Zoe.

I don’t doubt the overall trend here. But to offer a partial defence of HL users.... there may be a small portion of them who use the platform for their speculative bets. They have their safe money invested in funds elsewhere, and use broker platforms for stocks they choose themselves, which are normally the “fun” ones with perceived large pay offs. 

Admittedly that won’t be everyone - probably a small portion - but it would make the overall figures worse. 

Nevertheless, you can’t disagree with the overall message. Treat any stocks on these lists with caution and do your research!

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bcfc92 22nd Aug 28 of 33

Good article Zoe, highlighting the danger of following the crowd!

However I must come to HL's defence and say that these lists are not share recommendations or buy tips. As you mentioned in one of your responses: "I’m not testing stocks promoted today against historic data but stocks promoted historically against the relevant historic data."  HL does not promote these lists as buy or sell recommendations they are there purely for information purposes on the most traded shares on a given day.

I think you raise an excellent point in this article though in that following the crowd rarely results in outperformance! The StockRanks are a much better tool to help select winning shares!

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justinian 23rd Aug 29 of 33

The question to ask is "why is this stock in the most viewed/traded list"?

The reasons differ. Having a large shareholder base is obviously one. Lloyds with its huge Halifax shareholder base (due to de-mutualisation some moons ago) is one, BT with its massive staff share programme is another.

The sheer size of the stock capitalisation is another reason why there may be so many shareholders. e.g. Vodafone, Lloyds, BT.

Then there is "being in the news" - Burford ticks the box on this one with its fall from grace and consequent fear. Others will attract the greedy as speculative plays like miners.

So, given there are real reasons beyond company features as to why the companies may be in the lists, I'm not sure you can draw many inferences.

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andrea34l 23rd Aug 30 of 33

An excellent piece of research and an interesting read.

I wonder if anyone has done any research into the performance of unit trusts recommended by Hargreaves L compared to their underlying sectors - I have been increasingly of the opinion that there are some very ropey contenders in their recent recommendations for Wealth 150 (now 50), having plotted a few against other trusts in the same sector as those recommended... including, of course, funds managed by Woodford.

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Montale432 28th Aug 31 of 33

Thought-provoking and direct. Of course maybe HL could make it even clearer that these lists are for information and interest only but definitely not recommendations. Indeed HL rarely give advice unless the client specifically requests it though their comments section is a useful starting guide prior to DYOR ,preferably through Stockop.

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The Third Man 31st Aug 32 of 33

In reply to post #507006

Hi Peter

I give in, will you tell me where I find the checklist please?


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Neil Williams 31st Aug 33 of 33

In reply to post #509116

3rd Man - Searching Stockopedia (using the search box at the top of the page, in the middle) for “investing principles” finds a few things including this​

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About zoefuji


I'm a first-year undergraduate at Oxford University reading Philosophy, Politics, and Economics I have been interested in investing since a young age as prompted by my parents but I have only properly started investing myself recently. more »

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