Hargreaves Lansdown (LSE:HL) shares haven’t been kind to investors in 2022. The Bristol-based financial services firm has been one of the biggest losers on the FTSE 100 over the past year. In fact, it is down 47% over 12 months.
That’s clearly a terrible return for investors. But I think there are plenty of reasons to be positive about this stocks and funds supermarket.
So let’s take a closer look at Hargreaves Lansdown and why I’m buying this stock.
Strong fundamentals
Hargreaves Lansdown currently trades with a price-to-earnings (P/E) ratio of 17. The metric is used to value a company, measuring its current share price relative to its per-share earnings.
Hargreaves’ P/E ratio is a little above the index average but this reflects the stock’s future growth potential.
Hargreaves Lansdown is not a typical growth stock, but I believe it will outperform most of the index in the coming years.
The firm also has an attractive dividend yield of 5% right now. That’s certainly not something you’d expect from a growth stock.
Outperforming sector
The pandemic was an exceptional period for Hargreaves Lansdown. With people confined to their homes, thousands — maybe even millions — started investing for the first time. According to research from Lloyds, one in 10 Britons has started investing since the start of the pandemic.
But clearly the growth experienced during the pandemic was hard to sustain. As people returned to the workplace and bar, restaurants and cafes reopened, Britons spent less time investing.
However, Hargreaves Lansdown is still registering overall business growth. In fact, in August, it turned out that Hargreaves was growing faster than many analysts had predicted.
The business recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m for H1. This came at a time when many other wealth management businesses registered net outflows.
I appreciate not all the data was so positive. There was a 37% fall in net new business year on year, an 8% fall in revenue, and a 9% drop in assets under administration. But this is reflective of the a challenging investment environment and the high starting point with regards to growth during the pandemic.
Positive long-term outlook
In the near term, I appreciate that there may be challenges as the cost-of-living crisis prevents regular investors from putting money into the Hargreaves Lansdown platform. That’s one way of looking at it. Equally, investors may be keen to ensure their money is working as hard as possible.
But in the longer run, I think there is more certainty. I believe the platform will benefit as more and more investors look to take control over their own finances. Funds and wealth managers can be expensive, so with the options available, I see investors increasingly managing their own portfolios.
So, down 47% in a year, I’m buying more Hargreaves Lansdown stock.
