Could wealth managers St James’s Place plc and Hargreaves Lansdown plc boost your personal balance sheet?

Edward Sheldon looks at high-flying wealth management stocks, St James’s Place plc (LON:STJ) and Hargreaves Lansdown plc (LON: HL). Could they boost your personal portfolio?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today, I’m running the rule over two UK-based wealth management stocks. Could these stocks add some fizz to your personal portfolio?

St James’s Place

FTSE 100 wealth manager St James’s Place (LSE: STJ) offers tailored face-to-face wealth management advice to individuals, trustees and businesses, through a network of over 3,400 qualified advisers. The company has a strong client retention rate and benefits from high barriers of entry to the industry. 

It has been a strong performer over the last five years, rising from around 350p to 1,200p, a gain of 240%. Shareholders have also been rewarded with impressive dividend growth, the payout increasing from 8p per share in FY2011 to 33p last year. 

Interim results released this morning for the six months to the end of June looked impressive. Net inflows surged 40% to £4.3bn, taking group funds under management to £83.0bn, and the company generated new business profits on a European Embedded Value (EEV) basis of £343m, up 50% on last year. Underlying profit before shareholder tax on an IFRS basis came in at £106.3m, up 44% on last year. 

In a signal of confidence from management, the interim dividend was raised a formidable 25% to 15.41p. Chief executive David Bellamy said: “The continued momentum across all aspects of our business and growth in adviser numbers underpins why we remain confident in our ability to deliver sustained growth.

While these results look excellent, I’m not sure there’s a great deal of value left in the stock at the current valuation. With analysts forecasting earnings of 42.4p for the full year, the stock trades on a forward P/E ratio of a lofty 28.3. Furthermore, while dividend growth has been excellent in recent years, dividend coverage looks a little thin at present. 

For this reason, I’m not a buyer of the stock right now. There’s a lot I like about the company, but after a 70% share price run since Brexit, the valuation is just little too stretched to offer much value, in my view. 

Hargreaves Lansdown

Similarly, savings and investment platform specialist Hargreaves Lansdown (LSE: HL) has also been a strong performer over the last five years, its shares rising around 150%. However, like St James’s Place, the stock’s valuation looks a little high to me. 

There’s no doubt that it has many things going for it – assets under management have surged in recent years, rising from £26bn in 2012 to £77bn at 30 April, and the company has enjoyed strong operating margins of around 50%-60% in the last few years. 

Furthermore, the investment provider should benefit from the UK’s ageing population and recent changes to pension legislation going forward. City analysts expect the company to lift its dividend by a huge 60% this year, taking the forward dividend yield to a healthy 2.9%. 

I use the Hargreaves Lansdown platform for my self-invested personal pension (SIPP), and I’ve always been very impressed with both the interface and the company’s customer service.  

However, at the current valuation, I’m not seeing a great deal of value in the stock. Competition in the mutual funds space is set to heat up in the near future, with US tracker fund giant Vanguard recently launching in the UK, and on a forward P/E ratio of 31, Hargreaves Lansdown looks to be fully valued right now, in my view. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

£20,000 tucked away? Here’s how I’d aim for a £29,664-a-year passive income

This Fool wants to debunk the myth that making passive income is impossible. With £20,000, here's how he'd do it.

Read more »

Dividend Shares

Starting with £0, here’s how I’d turn my Stocks and Shares ISA into a second income machine

Jon Smith explains how compounding his dividend payments can help him to grow his Stocks and Shares ISA from a…

Read more »

Happy parents playing with little kids riding in box
Investing Articles

A 9.7%-yielding FTSE 100 dividend gem that could create generational wealth

A sizeable investment pot that can be passed onto the next generation could be built with much smaller investments over…

Read more »

Investing Articles

Up 31%, do Lloyds shares have more to give?

Shares in major FTSE 100 bank Lloyds are on a charge. But what could be in store for the stock?…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Time to sell this FTSE 100 underperformer, says Goldman Sachs

Analysts at one investment bank have a ‘sell’ rating on FTSE 100 stock Diageo. But could a short-term weakness in…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Down 5%, Glencore’s share price looks a serious bargain to me now

Glencore’s share price looks undervalued to me, supported by strong earnings growth prospects and the potential resumption of extra shareholder…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’d invest £6,580 in this FTSE 250 REIT for £500 passive income

This FTSE 250 renewable energy enterprise is on track to become a Dividend Aristocrat! Here’s how I’d invest to earn…

Read more »

Investing Articles

Buying 1,000 of some dividend shares today unlocks £45 in weekly passive income!

These shares are among the biggest dividend payers in the FTSE 100. Should investors be buying them now to earn…

Read more »