These are the 5 most bought UK shares in the last month…

There are a lot of popular UK shares that investors like to buy. Most tend to be within the FTSE 100. And this month, that trend hasnât changed, at least not according to investors using AJ Bellâs trading platform. Over the last month, it seems the vast majority of British retail investment capital has been concentrated in:

BP (LSE:BP.)
Rolls-Royce Holdings
Shell
HSBC Holdings
International Consolidated Airlines

So whatâs behind this popularity? And should other investors be considering these businesses as well?

Demand for energy

Itâs interesting to see two of the UKâs largest oil & gas shares on investorsâ shopping list. And since BP commanded 10% of all Buy trades over the last month, it seems like a good place to zoom in. So whatâs driving the seemingly strong investor appetite?

There are a lot of factors at work here. However, it seems the biggest driver of interest is the groupâs recently announced strategic reset.

In February, CEO Murray Auchincloss announced that BP will be ramping up its oil & gas investments to $10bn a year while reducing investments into renewables, from $5bn to $2bn. Why? Because in a higher interest rate environment paired with higher fossil fuel prices (due to rising geopolitical tensions), oil & gas is a far more lucrative source of income. And if managementâs projections are correct, this pivot could result in adjusted free cash flow expanding by more than 20% per year.

Beyond the business fundamentals, BP shares also generally look cheap. Its price-to-sales ratio sits at just 0.48 â less than half the industry average of 1.1. And with a 6.1% dividend yield that continues to be paid out, it isn’t hard to understand why investor interest is so high.

Whatâs the catch?

Environmental concerns aside, BPâs future seems to be more secure under this new strategy, resulting in stronger investor sentiment. But even FTSE giants like BP have their weak spots. So what are the risks of investing in this business?

One possible explanation for the stockâs discount is the state of its balance sheet. BP has notably higher leverage compared to many of its peers. As such, management has outlined its intention to reduce net debt from around $26.9bn to a target range of $14bn-$18bn by 2027.

While thatâs good news for longevity, it means a larger portion of the groupâs profits will be allocated towards debt repayment rather than asset expansion. The higher leverage also makes the business more sensitive to changes in fossil fuel prices since interest payments on loans squeeze net margins. The impact of this is only amplified if BPâs production volumes fall â something that the company recently warned was a possibility in 2025.

The bottom line

While the operating landscape for BP seems to be improving, the company still has a long list of challenges to overcome, particularly when it comes to production and refining margins. So while I understand the sudden surge in interest from investors, this isnât a stock Iâm rushing to buy right now.

As for the other UK shares on this list, each presents a unique opportunity for investors. But as demonstrated with BP, there are also risks that must be carefully considered. Donât forget, simply following the herd isn’t an intelligent investment strategy.

The post These are the 5 most bought UK shares in the last month… appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. 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.