FTSE 100 giant jumps 4.5% as profits tank! Here’s why I’m buying

Hargreaves Lansdown shares gained nearly 5% in early morning trading after the FTSE 100 company announced a 26% fall in profits.

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FTSE 100 stock, Hargreaves Lansdown (LSE:HL) gained on Friday morning despite the firm announcing a fall in profits. The Bristol-based financial services company reported that pre-tax profit was down 26% year on year.

Despite lower profits and the general negative economic forecasts surrounding the UK, I’m bullish on Hargreaves Lansdown. I already own stock in this firm, but I’d buy more of it today.

So, let’s take a close look at the firm’s performance and why I’d buy more.

Better than expected performance

The pandemic represented an exceptional operating environment for Hargreaves Lansdown and many of its peers. With people confined to their homes, and many ‘normal’ activities out of bounds, thousands of people started investing. According to research from Lloyds, one in 10 Britons has started investing since the start of the pandemic.

So it was hardly surprising earlier this year as the pandemic eased that Hargreaves Lansdown announced business was slowing. This caused the share price to collapse. In fact, it’s down nearly 50% in a year.

But today’s performance figures aren’t entirely negative, in fact, the business has shown plenty of resilience that the market hadn’t priced in.

The headline data is that net new business fell 37%, total assets under administration were 9% smaller at £123.8bn and revenue shrank by 8%.

However, while many businesses have seen net outflows of cash, Hargreaves still recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m. That’s in the context of a cost-of-living crisis that’s reducing Britons’ disposable income.

I had actually been fairly optimistic ahead of this earnings report. After all, with soaring inflation, I want to make sure my money is working as hard as it can, that is, being invested. And I think this earnings report shows that other Britons were thinking the same.

Positive long-term outlook

While growth has slowed down over the past year, the business is clearly still growing at an impressive rate. Net inflows of £5.5bn are particularly impressive.

In many respects, I’m not surprised. Hargreaves Lansdown offers wealth management services, but it also has a market-leading platform for self-managed investments. In fact, it’s my platform of choice. It makes it easy for me to manage my ISA, pension and other investments, while providing news and analysis.

It also offers useful research, a handy mobile app, real-time streaming data and shortlisted advisor picks. I appreciate that its peers have similar offerings, but I just prefer the HL offering.

And in the long run, I see Hargreaves’ platform becoming increasing popular. Many of those who started investing during the pandemic are Millennials or Gen Zers who are looking to make their money work for the long term, according to Barclays.

I appreciate that recession fears and a continuing cost-of-living crisis may eventually see net inflows fall further this year. But on the whole, I’m still bullish.

I already own Hargreaves Lansdown shares, but I’d buy more today. It’s also worth noting that the dividend yield is currently around 4.5%, which isn’t bad at all.

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 considered so you should consider taking independent financial advice.

James Fox owns shares in Barclays, Lloyds and Hargreaves Lansdown. 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.

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