Buying a stock when it’s trading at a 52-week low could mean that it’s undervalued. It could also mean that the company has really struggled over the past year. Therefore, any stock that fits into this category needs me to investigate carefully before I buy. Having done so, here’s one FTSE 100 stock that I think is a good buy for me right now.
Reasons for the falling share price
The company I’m talking about is Hargreaves Lansdown (LSE:HL). The share price hit 961p last week, a new 52-week low. Based on the closing price a year ago, the shares are down 41%. Clearly, things haven’t gone to plan for the retail investment platform provider.
Last summer, the share price struggled due to underwhelming results from the pandemic. Even though the profit after tax was only slightly lower than the previous year (£296m vs £313m), analysts were expecting much better results. In fairness, with the spike in retail trading activity from the beginning of the pandemic in 2020, it’s easy to understand why many were expecting a bumper financial year.
There was also concern late in 2021 about the lack of volatility being seen in financial markets. Without large swings in the stock market, fewer transactions would mean lower revenue for Hargreaves Lansdown. The FTSE 100 stock saw the share price fall into a downward spiral.
Why I like this FTSE 100 stock
One thing that’s noticeable with the stock market is that it moves on very quickly. Even though a company might have experienced a tough year, investors can be quick to flip to buying mode if the outlook improves.
I think this is going to be the case for Hargreaves Lansdown. The interim results for the second half of 2021 revealed a shift in strategy. The CEO commented that the business would be shifting to “redefine wealth management”.
It believes that incumbents are failing customers in this regard, and that it has enough of a strong client base already to service this new segment. Importantly, the FTSE 100 company already has a 43.3% market share with retail investors. Therefore I think it can easily cross-sell more advisory services and earn high fees from this wealth managemnt proposition.
It also revealed in the half-year report that assets under management had increased by 20% from the same period last year to £141.2bn. If clients are moving money to Hargreaves Lansdown, growing this number, I think it should make it easier in the long run to help generate profits. After all, I imagine customers will use the money to eventually invest via the platform rather than just leaving it in cash.
An undervalued buy?
The issues that plagued the share price of this FTSE 100 stock could continue going forward. Yet if this pivot to wealth management takes off, I think the current share price doesn’t reflect the value of this business years down the line. Therefore, I’m considering buying shares in Hargreaves Lansdown at the moment.
