Hargreaves Lansdown (LSE: HL) shares were once a red hot favourite among investors, but lately they’ve lost their way. The FTSE 100 stock fell by more than half over the last five years, as its breakneck expansion slowed leaving the shares looking overvalued.
Wealth managers and financial advisers often struggle when the stock market falls, and we’ve been through some bumpy times due to the pandemic, war in Ukraine, tensions over Taiwan and rocketing inflation and interest rates. Yet the sector also rebounds sharply when the good times roll, as we saw last week.
Feeling more positive
Last Wednesday’s (19 July) surprise inflation drop put a rocket under fund managers M&G, Abrdn and Schroders, which all ended the week more than 4% higher. Advisory group St James’s Place bounced 5.78% but Hargreaves Lansdown smashed them all growing 11.1%. Its shares are up 19.43% over the last month, but just 8.4% over one year.
The £4.37bn company enjoyed a double booster on Wednesday, as it coincidentally published a positive set of results for Q4. These showed a healthy 6% increase in net new business to £1.7bn, with assets under management up 2% to £134bn.
Personally, I’m feeling bullish about UK shares right now, as inflation retreats and interest rates peak. Maybe I’m getting carried away after last week’s excitement, and I accept that we’re not out of the woods yet.
If July’s inflation figure disappoints, or the Bank of England hikes base rates by 50 basis points to 5.5% on August 3 and delivers some hawkish guidance, recent gains could vanish.
Another concern is that Hargreaves Lansdown isn’t the cheapest stock on the FTSE 100. Despite its troubles, it still trade at 18.4 times earnings. However, it’s forecast to deliver a decent dividend yield of 4.43% this year, rising to 4.95% in 2024. While there are bigger dividend payers on the index, Hargreaves Lansdown offers better share growth prospects than most, in my view.
It’s a bit pricey all round
It faces tough competition from a plethora of rival platforms such as AJ Bell, Bestinvest, Interactive Investor and Fidelity. Another worry is that Hargreaves tends to come out as the most expensive, which may be why it recently cut prices. It doesn’t seem to be harming the brand, which is fabled for its customer service. Client numbers grew by another 13,000 to more than 1.8m in Q4.
The main thing stopping me buying Hargreaves Lansdown shares today is that I’m irritated at missing out on the recent 20% jump. There’s nothing I can do about that now. I’ll be looking for a buying opportunity before the next rally, because I suspect Hargreaves may lead that one too.
Timing share price purchases is next to impossible. Whenever I buy Hargreaves Lansdown, I will aim to hold them for a minimum 10 years, and ideally longer. That will exposing me to every stage of the stock market cycle. I’ll be hoping for a lot more ups than downs.
