The share price of investing platform Hargreaves Lansdown (LSE: HL) has been hammered since Neil Woodford was forced to stop investors pulling money out of the income fund bearing his name. The debacle has been particularly toxic for HL because it was a long-time supporter of Woodford and included his fund on its ‘best buy’ lists, therefore encouraging, many would say, investors to pour money into the fund. That is money those investors can no longer access and have no idea when they will be able to do so.
To say the situation is currently messy is an understatement. For anyone interested in investing, this has been the biggest ongoing story for some weeks now. All that being said, for anyone new to investing, it shouldn’t deter you from putting your money into listed companies, or even, in my opinion, investing in HL.
The past, the present and the future
HL has been an incredible investment for many years, its share price is up 52% over half a decade. Despite the recent slump, it is still in positive territory for 2019 – just. The share price has risen just over 3% so far this year. The recent hit to its price means that it now trades on a P/E of 38. Although that is clearly very high, with the share price’s recent Woodford-linked falls, it is lower than for some time. The reason it has been so highly valued in the past (and still is today) is the company’s growth.
The 2018 results – the last full-year set of results available – showed that revenue increased 16% and the dividend per share by 38%. With many other companies in the FTSE 100 having to axe dividends and seeing growth stall or go into reverse, this is an impressive set of figures.
Looking ahead, several trends support the investment case in Hargreaves Lansdown, I believe. An ageing population and a rise in self-invested pensions and increased pension freedoms being those I think will give the biggest long-term boost to the firm.
Seeing the bigger picture
HL is well positioned in my view to keep its dominant position in the market and add new clients, which should help boost its assets under management (AUM) and therefore its profits. It has a well-recognised brand and is known for offering great customer service, both of which allow it the luxury of charging higher fees than some rivals and which boost its margins and profitability.
With the shares now trading more cheaply than they were just a short while ago, due to the Woodford debacle, I would be tempted to add the shares to my portfolio. HL is not ultimately at fault for what has happened and is being punished by association. That is understandable, but also in my eyes makes it a short-term problem only. The long-term trends support the idea that HL can keep growing quickly, which as an investor is something I want to see.
Andy Ross has no position in any of the 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.