Hargreaves Lansdown (LSE:HL) has been one of the FTSE 100‘s worst performers this year. The stock is down 33% over the past 12 months and 47% over the past three years. However, I think this belies a very positive long-term outlook for the UK’s most popular investment platform.
I actually already own shares in Hargreaves Lansdown, having bought earlier in the year when the share price started dipping. But today, I’m still bullish on this financial services firm.
So, let’s take a closer look at this stock, and explore why I’d buy more Hargreaves Lansdown shares today.
The Bristol-based financial services company recently reported that pre-tax profit was down 26% year on year. However, this was expected. Hargreaves Lansdown saw its business soar during the pandemic. With millions of people confined to their homes and with restaurants, bars and shops all closed, Britons started investing.
But the pandemic-era growth was unsustainable. In early August, the firm said that new business shrank by 37% in 2022. Total assets under administration were 9% down at £123.8bn and revenue fell by 8%.
But it wasn’t all bad news. Despite what some analysts were expecting, the firm recorded £5.5bn of net new business, and a 92,000 increase in active clients. At a time when many asset managers and financial services companies were seeing net outflows, Hargreaves saw net inflows, again.
More and more Britons are looking to manager their own portfolios. And this trend was accelerated by the pandemic. According to research from Lloyds, one in 10 people in the UK started investing since the start of the pandemic.
And this is reflected in Hargreaves’s growth in active investors. In 2018, the group had 1.09m active clients, and this has risen year by year, reaching 1.73m in 2022. As a result, revenue has grown in most years, with the exception of 2022.
Assets under administration have also grown in each of the years (again, with the exception of 2022), which is slightly unique in that the markets were down considerably at the time the annual report was published.
There are always risks, of course. Hargreaves has several competitors that charge less for transactions. I prefer Hargreaves’ platform, but others might be more price sensitive.
It’s also worth considering that the longer the cost of living crisis continues, the less likely it is that people will have spare cash to invest.
Equally, it could go the other way. As inflation reaches double-digits, Britons would like to make sure their cash is working hard and growing.
Could I really double my money?
It’s worth noting that Hargreaves has previously traded at double its current share price. This is a stock in growth mode so investor sentiment and valuations change over time.
Yet I contend that if the growth in client numbers is sustained until 2030, the firm will have 3m active investors. And if current inflow rates are sustained, there will be a total inflow of close to £60bn during the coming eight years.
Will these factors see the share price double? It’s hard to tell because there’s a lot of underlying data to consider. But I’d buy and hold this stock for the long run, and I expect to see considerable share price growth.
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James Fox owns shares in Hargreaves Lansdown and Lloyds. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. 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.