With many parts of the market depressed, there’s no shortage of cheap shares to explore. But today I’m looking at Hargreaves Lansdown (LSE:HL). The Bristol-based firm runs an investment supermarket platform, providing clients with access to thousands of stocks and funds.
I already own shares in Hargreaves Lansdown, but I’m looking to buy more in the new year. So, let’s explore why I’d buy this stock in 2023 and hold it for at least a decade.
Recent performance
The value of Hargreaves shares is down 40% over the past year, and even more from 2021 highs. The stock became very expensive during the pandemic. Investors were clearly excited by the pandemic era growth — driven by millions of people being stuck at home with nothing more to do. But this exceptional period of growth was unsustainable.
Despite the unfavourable macroeconomic climate, however, Hargreaves is continuing to grow. The group recorded £5.5bn of net new business, alongside a 92,000 increase in active clients and revenue of £583m for H1. This came at a time when many wealth management businesses registered net outflows of cash and clients.
The third quarter saw growth slow as the cost-of-living crisis started to bite. Hargreaves reported net new client growth of 17,000 in the period, taking the total to 1,754,000 active clients. However, total revenues grew substantially (15%) as the increase in net interest margin more than offset the reduction in share dealing volumes.
Following up on the latter point, Hargreaves is set to make £200m in the next year as a result of higher interest rates on cash deposits.
Long-term prospects
Hargreaves is the market leading investment platform for a reason. It makes it simple for me to manage my ISA, pension, and other investments all in one place. The firm also provides me with up-to-date news and analysis — that’s why I use the firm for my investments. In addition to platform services, the company provides wealth management services.
But I see Hargreaves benefitting from one major trend over the next decade. And that’s the increasing willingness of Britons to invest and have control over those investments. According to research from Lloyds, one in 10 Britons has started investing since the start of the pandemic.
Research suggests that 33% of Brits owned stocks and shares in 2020. And that represents a 50% increase from 2018 when 22% of Britons owned stocks and shares.
In the short term, higher interest rates are likely to provide a handsome boost to Hargreaves’s revenues. And in the long run, with more and more people investing, I see Hargreaves as being very well positioned to benefit.
And this is why, with Hargreaves trading substantially down year on year, I’m looking to buy shares in the firm and hold them for a decade.
