I own a range of FTSE 100 stocks, but there are only few I envisage never selling. When thinking about stocks I don’t intend on selling, I’m looking at long-term trends.
These trends including our ageing populations. For example, the EU-27’s median age is projected to increase by 4.5 years during the next three decades, to reach 48.2 years by 2050. As populations age, there will be increasing need to spend more money on healthcare, including drugs and devices.
But today, I’m looking at a British company at the cutting edge of investment technology. Hargreaves Lansdown (LSE:HL) runs an investment supermarket platform, providing clients with access to thousands of stocks and funds.
So why would I never sell this stock? Let’s find out.
The investment platform is the market leader in the UK. It’s very profitable and saw sizeable increases in revenue in each of the five years to 2021. But the company is already benefiting from a trend. And that’s a trend towards investors taking personal control over their investments.
This is something the pandemic accelerated. With people confined to their homes, and many ‘normal’ activities out of bounds, thousands of people started investing themselves, rather than paying others to do it. According to research from Lloyds, one in 10 Britons has started investing since the start of the pandemic.
The cost-of-living crisis and the recession will likely slow this trend, as pockets get squeezed and people invest less. However, in the long run, I think more and more Britons will start investing, and they will manage their own portfolios rather than paying others to manage it for them.
Market leader for a reason
Hargreaves Lansdown provides wealth management services, but it also offers a market-leading platform for self-managed investments. It’s also my investment platform of choice. 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.
Moving forward, management announced earlier in the year a plan to upgrade its technology and provide new forms of insight for clients. Hargreaves intends to invest £175m over the next five years in an effort to stay ahead of the competition.
Every investment has risks. And with Hargreaves, there are some near-term challenges. As those pockets get squeezed, there could be a near-term reduction in growth. The platform now has 1.7m users, but I have a feeling that they might not hit 2m next year.
Hargreaves shares are down this year by around 43%. That’s clearly not a good return on any investment. However, it reflects the fact that the shares started to look expensive — as did other growth stocks — during the pandemic. It was also clear to some that the firm would struggle to maintain its pandemic-era growth after Covid.
Given the current dip, I’m even looking to buy more Hargreaves shares. The 4.5% dividend yield is also very attractive when taking into account the firm’s potential growth.
James Fox has positions in 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.
Motley Fool UK 2022