Rolls-Royce (OTCMKTS:RYCEY, OTCMKTS:RLLCF) is not necessarily a high-flying equity, but shares of its preferred RLLCF stock certainly are soaring today. In fact, the preferred shares are up more than 200% at the time of this writing. What is this all about? And what do investors need to know?
To start, investors should be sure to understand the basics. Rolls-Royce is a specialist in things like commercial jet engines, repair services for regional airlines and specialized military engines and aircraft parts. Although its name adorns luxury vehicles, it sold off those branding rights several years ago.
Additionally, Rolls-Royce primarily trades on the London Stock Exchange under the ticker RR. For investors in the United States, RYCEY is its American Depositary Receipt (ADR). RLLCF, also traded over the counter, is the preferred stock. These shares are very similar to bonds, and typically move in response to changes in interest rates. They also reflect how investors feel about any company and its financial prospects.
So what exactly has RLLCF stock rocketing more than 200% higher today on heavy volume? Right now, more than 260 million preferred shares have traded hands today. That compares to the average three-month volume of 6.5 million.
At surface level, such a move should indicate that investors are suddenly feeling a lot more confident about Rolls-Royce. Although we are not seeing a corresponding spike in bond prices, there may still be some room to run with this theory. That is especially true considering how hard Covid-19 has been on the aviation industry. Big customers like Boeing (NYSE:BA) and Airbus (OTCMKTS:EADSY) simply did not need as many engines from Rolls-Royce this year. With that in mind, Moody’s downgraded its debt in September 2020, warning that the outlook was grim.
However, a turnaround story could be playing out.
What to Know About RLLCF Stock
Although investors should be cautious with the preferred RLLCF stock, especially as it is not entirely clear what is moving it today, there is reason to believe in a turnaround story.
Just today, Jessica Beard wrote for The Telegraph that one analyst is really warming up to Rolls-Royce. In fact, Fidelity analyst Hyun Ho Sohn wrote that Rolls-Royce will soon become the best tech stock in Great Britain. He said that as his firm eyes the pandemic turnaround story, Rolls-Royce is an interesting play in tech. This is because the company takes in and analyzes a lot of data. That kind of proclamation no doubt is exciting investors.
Additionally, another analyst said that Rolls-Royce is on track to become a Tesla (NASDAQ:TSLA) competitor. What? How? Well, as Jay Yao wrote for the Motley Fool this week, it would make sense for Rolls-Royce to become a competitor in the electric aviation space. Experts also think Tesla will make its moves there, expanding from passenger vehicles to the electric aircraft. With its specialization in engines and aircraft part, Yao is betting on this rivalry emerging.
So what should you do here? View RLLCF with caution. Although there is some social media speculation and some bold analyst calls, it is not 100% clear why preferred shares are moving. However, keep Rolls-Royce on your radar. This could be an interesting aviation story.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.