Hargreaves Lansdown (LSE:HL) shares are among the worst performing on the FTSE 100 over the past 12 months. The financial services company has seen its share price tank as growth slowed.
The company, while it offers an attractive dividend (4.6%), can be seen as a growth stock — and there’s not too many of them on the FTSE 100. Founded in 1981, the firm provides a supermarket-esque platform to buy and sell stocks and funds.
In recent years, it has been successful in attracting new customers from its traditional competitors.
So let’s take a closer look at this financial services firm. How successful would I have been if I bought this stock three years ago? And should I buy more now?
Downward trend
If I had invested £1,000 in Hargreaves Lansdown shares in 2019, today I’d have £460. That is clearly a very poor return on my investment.
The majority of these losses have come over the past year. The stock maintained its share price during the pandemic as more and more Britons started investing. In fact, research suggests that 1 in 10 Britons started investing in 2020.
However, as restaurants, bars, cafes and workplaces reopened, growth slowed. This has been compounded by a cost-of-living crisis. It seems logical that people would have less money to invest right now.
Why I’d buy more!
Despite the falling share price, Hargreaves has performed admirably in 2022, especially compared to traditional peers such as abrdn.
In the last quarter, the firm reported 17,000 net new clients, taking the total to 1,754,000 active clients. Revenue for the period came in at £162.9m, up 15% year on year.
Hargreaves is set to make £200m over the next year as a result of higher interest rates. And this was one of the factors pushing up revenue generation for the last quarter.
These higher interest earnings have essentially mitigated a fall in investor dealings. Dealing charges and automated sales charges represent one of the company’s main revenue generators.
So, in the near term, I see higher interest rates providing a welcome boost to revenues while investor dealing falls during the cost-of-living crisis.
However, in the long term, I see Hargreaves as being well-positioned to benefit from two trends. The first being an increasing appetite to invest, something we, as Britons, have been notoriously bad at traditionally. And secondly, an increasing desire to manage those investments ourselves.
As the UK’s No 1 platform provider, I can see Hargreaves continuing to grow its active client base because of these factors.
However, I do appreciate that Hargreaves faces some challenges. Including that some new competitors don’t charge, or charge less, for share dealings. This could impact growth going forward. Personally, I believe Hargreaves has a strong product, with more advice and guidance than its peers, and this will continue to separate it from the rest.
So despite a downward trend in the share price over three years, I’m buying more Hargreaves stock for my portfolio.
