The past month has been a poor one for the FTSE 100. The UK main market index has lost 4% since 28 September. It’s also dropped 7.3% over six months and is now down 2.1% in 2023. Yet some Footsie stocks have fallen much harder, including Hargreaves Lansdown (LSE: HL) shares.
Hargreaves Lansdown shares trail the FTSE 100
Here’s how this stock has lagged the Footsie over six different time periods:
| Change over | HL | FTSE 100 | Difference |
| Five days | +1.1% | -1.5% | -2.6% |
| One month | -10.8% | -4.1% | +6.8% |
| Six months | -12.4% | -7.3% | +5.0% |
| 2023 to date | -17.9% | -2.3% | +15.6% |
| One year | -8.3% | 3.1% | +11.4% |
| Five years | -62.7% | 2.8% | +65.5% |
Other than a modest rebound this week, the company’s share price has lost ground over all periods, ranging from one month to five years. Indeed, this FTSE 100 stock has lost close to two-thirds of its value over half a decade.
Of course, the past is not a useful guide to the future in financial markets, as elsewhere in life. Even so, the big question is will Hargreaves Lansdown continue to underperform the wider UK market, or is this tanker set to turn around?
Growth is slowing, but still there
When I invest in companies, I buy into the underlying business, rather than its shares as such. And Hargreaves Lansdown is a well-known, well-established firm in its field.
Founded by Peter Hargreaves and Stephen Lansdown in 1981, the group has grown to become the UK’s leading online-investing platform. Based in Bristol, the firm employs over 2,000 people.
In its latest trading update (released on 19 October), the group reported net new business of £0.6bn, taking total assets under administration to £134.8bn — close to 2021’s record highs. Its client base also increased by 8,000, lifting the total to over 1.8m. In addition, Q3 revenue came in at £183.8m, up 12.8% on a year earlier.
As I write (near the market close on Friday, 27 October), the share price stands at 704.3p, valuing this business at £3.3bn. This is at the smaller end of the FTSE 100, possibly putting the firm at risk of being relegated to the mid-cap FTSE 250 index.
Bargain buy or value trap?
Given the share price has plunged by 24% since it closed at 927p on 21 July, some might suggest that Hargreaves Lansdown is in managed decline. I respectfully disagree.
Clients may come and go, but this company’s success is largely driven by rising financial markets. When stock and bond prices rise, so too does the firm’s fortunes. My wife, children and I all have Hargreaves Lansdown accounts — and I regard their customer service as outstanding and second to none.
Right now, this stock looks undervalued to me, based on fundamentals. It trades on a multiple of 10.3 times earnings, for an earnings yield of 9.7%. This means that the chunky dividend yield of 5.9% a year is covered a reasonable 1.6 times by earnings.
These numbers tick all my value boxes, so I would gladly load up on Hargreaves Lansdown shares today. Except I won’t, solely because my wife and I bought the stock for 801.5p a share in August. Sure, we’re down 12.1% to date, but I have high hopes for these cheap shares!
