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(HL) Hargreaves Lansdown General Share Chat

Discussion in 'General Share Chat' started by Microem1, Nov 10, 2015.

  1. Groucho

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  2. Groucho

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  3. Groucho

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    Here’s a paradox: the disappearance of a one-off boost to business causes the shares of the company concerned to fall by 15pc, even though that same one-off boost to business had failed to increase the share price in the first place.

    Hargreaves Lansdown’s shares slumped last week after a decline in profits for the six months to the end of December caused in part by the non-recurrence of a fillip the company had experienced in the same period of 2020. That fillip was the huge rise in interest in investing, especially share trading, during the pandemic. But all those extra customers, all the extra money they entrusted to Hargreaves and all the extra share trading commissions they generated did nothing for the shares. They began 2020 at about £18.50, were at about £15.50 at the halfway stage and £16.50 at the end of the year.

    Questor’s take on this is that the market’s more deep-seated disenchantment with the stock, prompted in this column’s view by its involvement in the Neil Woodford debacle, overpowered any inclination to react to that good news. There was no such inhibition, as we have seen, when it came to marking the shares down on the return of comparative normality after the pandemic.

    The 20pc fall in interim pre-tax profits was also due in part to a rise in costs and the reduced interest received on the cash it holds on behalf of clients after the emergency cuts in interest rates prompted by the virus.

    The company’s decision not to pay a special dividend – the ordinary divi rose by 3pc – probably played a part in the share price fall. The money saved will help fund an ambitious investment programme aimed at “transforming the savings and investing experience” for its customers.

    Questor believes that investors would have done better to focus on other numbers. The amount of money entrusted to Hargreaves by its clients rose by 17pc compared with the end of 2020 to £141bn; it now has 1.7m active clients, an increase of 48,000 since June last year; its client retention rate rose slightly to 92.7pc; and the company now has a 43.3pc share of its market for what it calls direct to consumer wealth management.

    More impressive still are the numbers we can expect should its investment programme, designed to seize what it sees as a once-in-a-generation opportunity to capitalise on people’s growing wish to save and “build their wealth and financial resilience through their lifetime”, deliver as hoped.

    ECD15030-1A5A-40F2-818B-BA7518077DD7.jpeg

    It expects to accelerate the amount of new money it attracts each year by a percentage in the high single digits of the amount under management at the start of the year; to cut costs as a percentage of assets from a figure in the “low 20s” basis points (1/100th of 1pc) to a figure in the “high teens” by 2026, and to increase margins, on an “underlying operating” basis, from a percentage in the low 50s – already a huge number – in 2023 to 55pc or more by 2026 “on a sustainable basis”.

    The combined effect, according to estimates from Numis, the stockbroker, will be “very rapid” growth, of 20pc or more annually, in earnings per share. That’s the kind of figure that should attract a pricey rating for the shares, especially in view of the strength and resilience of Hargreaves’ business model and brand, yet after the recent falls the shares trade at 23 times Numis’s estimate of 47.3p in earnings per share for the current full year, and 20.9 times the following year’s predicted 52p per share.

    Readers who followed our earlier advice to invest should hold on; others should buy.

    Daily Telegraph 03/03/2022
     
    Last edited: Mar 3, 2022
  4. Groucho

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    Britain’s biggest stockbroker has been accused of “double-dipping” by charging customers to hold their money yet failing to share with them the interest it earns on their cash.

    Hargreaves Lansdown made more than £60m in interest from clients’ cash held in its accounts during the pandemic, not a penny of which was passed on to these customers.

    The FTSE 100 firm, worth £4.7bn, earned close to 0.4pc in interest from custodian banks, where its customers’ vast collective savings are held, in the 12 months to June 2021. This rate fell to less than 0.2pc in the six months to December 2021, but the broker was still able to rake in £50.7m and £11.3m in interest from its customers’ cash in the respective periods, recently published accounts have revealed.

    Despite this, Hargreaves paid 0pc interest on cash held by its customers during the time, meaning savers saw none of the money earned from their own cash.

    While other brokers, including lower-cost rival AJ Bell, also pocketed some of the interest earned on clients’ cash, there are many firms that pass the interest earned on to their customers.

    James Daley of consumer campaign group Fairer Finance said Hargreaves was already a costly broker and customers were losing hundreds of pounds a year to these “hidden costs”.

    He added: “Hargreaves is already a relatively expensive stockbroker, charging customers 0.45pc a year to use its services. It is already charging premium prices, but is now double-dipping by profiting from the cash held by customers, while other firms pass on the interest.

    It all adds up to pretty poor value and the real-terms cost is only going to get worse as inflation rises.”

    Mr Daley said that even though interest rates were low, passing on none of the profits from customers’ cash “did not seem quite right”.

    Keeping interest payments at 0pc would become “indefensible” in the long term, he said.

    Close to £1 in every £10 deposited by Hargreaves Lansdown customers is held in cash, the accounts showed.

    The broker expects to increase its profits from these cash reserves, following two successive increases to the Bank of England’s interest rate in December and February. In its accounts, Hargreaves said these rate rises would be “beneficial to our revenues”.

    The central bank is expected to raise rates further this year, from the current 0.5pc to 1.25pc or higher.

    In light of rising rates, the broker has now increased the amount it pays on customers’ cash to up to 0.2pc. However, this applies only to pension pots containing more than £100,000 and is less than half the current Bank Rate. Isa savers earn up to 0.05pc on their cash – a tenth of Bank Rate.

    The rates pale in significance next to inflation, which reached a 30-year high in January of 5.5pc. Price growth is expected to exceed 7pc by April.

    The Financial Conduct Authority, the City watchdog, has warned savers against holding too much in cash, urging them to invest for the long term instead to preserve the buying power of their money.

    Last year it said it wanted to reduce the number of people who held more than £10,000 in cash by a fifth after it found that 8.6m people were losing out by earning little or nothing in interest.

    Mike Barrett of The Lang Cat, a consultancy, said investors should not be holding significant cash balances in their investment accounts for the long term. “Cash is of course a vital part of any portfolio, but investors will almost certainly be able to get better rates elsewhere. This is especially the case when platforms are retaining some of the interest for themselves,” he said.

    He called on brokers to “clearly highlight the impact any direct platform charges and hidden retained interest will have on the overall rate the customer receives”.

    Hargreaves said cash was not included when calculating customers’ bills. Its 0.45pc management fee applies only to invested funds.

    A spokesman said: “The interest we share with clients is reflective of this and the ultra-low interest rate environment.” He directed customers to the firm’s Active Savings account. It is a free service, separate from Isas and investment accounts, which automatically moves customers’ money into accounts that pay the highest rates.

    Sunday Telegraph 06/03/2022
     
  5. Groucho

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    Hargreaves Lansdown’s (HL) axing of its special dividend last month is the exception to the rule of recent increases in shareholder payouts and share buybacks that fund manager Nick Train (pictured) says are the hallmarks of his ‘boring’ collections of quality growth stocks.

    In his monthly update for Finsbury Growth & Income (FGT), Train, who is under pressure after a slump in relative returns last year, indicated his support for the broker, which in February lifted its ordinary half-year dividend by 3% but shocked investors by suspending special additional dividends for two years.

    This is to fund a £175m five-year programme to ramp up the digitisation of Hargreaves’ business and develop a new financial advice proposition. Shares in the FTSE 100 company, which made up 5.6% of the £1.9bn Finsbury Growth investment trust and 6.3% of its £5.3bn open-ended sister Lindsell Train UK Equity fund at the end of October, have tumbled 19% since the announcement on 22 February, not helped by volatile markets after Russia’s invasion of Ukraine.

    Hargreaves dropped out of the trust’s and fund’s top 10 holdings in November as the broker’s stock started the latest phase in a downturn that has seen the Bristol-based funds and shares supermarket lose more than half its value since a peak of £24.19 nearly three years ago. Shares are up 3% to £10.49 today.

    ‘We prefer our companies to retain as much of their earnings as possible to fund future growth. In other words, we prefer them to scrimp on dividends if they see better uses for internally generated cash,’ Train said, noting the £430m of net cash held by Hargreaves was ‘well above regulatory requirements’.

    February saw the bulk of Train’s investments do the opposite, however, buying back shares and lifting income distributions. The fund manager praised these as his portfolios endured another difficult month with Finsbury’s net asset value down 3.8% and UK Growth’s unit price off 4% against a 0.5% dip in the FTSE All-Share.

    ‘Dividend declarations say something about company boards’ long-term confidence in future free cashflow. Share buybacks really should signal boards’ perception about the intrinsic value of their company,’ said Train.

    https://citywire.com/funds-insider/...tm_campaign=BulkEmail_FundsInsider+DawnChorus
     
  6. Groucho

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    Shares in Hargreaves Lansdown came in for a drubbing amid worries that its wealthy babyboomer customers will soon be looking to move their money away from the group’s investing platform.

    Only last month Hargreaves was boasting that a record 1.7 million customers now use its platform to invest their savings.

    Analysts at Jefferies note that the group has a “large and growing customer base” but fear it is not recruiting enough younger people to make up for the older — and wealthier — ones they believe are taking their money elsewhere.

    “The central point is that Hargreaves’ profits are concentrated among its older clients, who are either approaching a point where they need advice, drawing down on their assets, or in some cases dying,” wrote Julian Roberts, a financials analyst at Jefferies.

    “As the children of the 1960s approach retirement, they are likely to move from being natural clients of Hargreaves to needing advice and therefore leaving the platform in growing numbers,” Roberts added. Given his feeling that the company’s “longer-term growth prospects have dimmed”, the analyst downgraded Hargreaves to “underperform”.

    That sent Hargreaves’ shares 25p, or 2.3 per cent, lower to £10.48, which is still some way above the 820p Jefferies thinks they are worth.

    One of Hargreaves’ rivals, AJ Bell, also struggled yesterday. This time it was analysts at Barclays who sparked the decline: they think AJ Bell shares are “expensive” compared with peers and repeated their “underperform” rating on the stock, which slipped 18p, or 5.6 per cent, to 303½p.

    https://www.thetimes.co.uk/article/...5?shareToken=5e191a502431761a37c256407f8dcd4d
     
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    Yorkshire Post 26/03/2022
     
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    Sunday Times 01/05/2022
     
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    Hargreaves Lansdown 'oversold' says Credit Suisse
    Hargreaves’ ambitious spending and growth plans are also reflected in the shares

    Hargreaves Lansdown shares have fallen 27% since the start of the year and are 17% beneath pandemic lows says Credit Suisse.

    That’s enough of a drop for worries about the fee margins, high operating margins and valuation all to be in the price, says the broker.

    Hargreaves’ ambitious spending and growth plans are also reflected in the shares, says Credit Suisse, even allowing for a 0.25% margin dip and no additional business.

    A trading update is due on 12 May and any price cuts would be received negatively in the first instance before fund flow benefits are taken into account.

    “Set against this, further UK rate rises and these being passed on by banks into corporate savings rates would be well received, in our view.”

    The price target is trimmed to 1,245p, but outperform remains the investment view.

    https://www.proactiveinvestors.co.u...sdown-oversold-says-credit-suisse-980447.html
     
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    Hargreaves Lansdown gained 42,000 customers in the first four months of 2022, down from 126,000 in the same period last year.

    Part of the slowdown is due to fewer armchair investors dabbling in shares for the first time while stuck at home during lockdown. Most investment platforms had a boom in new customers last year, but this has eased as more of us have returned to our normal lives.

    Britain’s largest investment platform, which is also one of the most expensive, may also be suffering from the cost-of-living crisis. Vanguard, a low-cost tracker funds specialist, gained 62,000 customers over the same four months this year, which was also a drop from the same period last year, when it added 83,000 new sign-ups. Vanguard has a platform fee of 0.15 per cent compared with charges of up to 0.45 per cent from Hargreaves, although Vanguard offers only its own funds.

    Vanguard said that a move to lower-cost options could be due to a longer-term trend towards low-cost investing. It may also reflect how more people are looking to lower their bills. Investors are becoming increasingly disillusioned with professional stock pickers, who often do worse than lower-cost funds that simply follow an index. They are also sceptical of high charges that can have a corrosive effect on investment performance over time. Danny Cox, of Hargreaves Lansdown, said: “[Our] breadth of offering, unrivalled client insight and market-leading service — used by over 1.7 million clients — ensures that we are well positioned to help more people save and invest.”
     
  12. Groucho

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    Next month marks the third anniversary of the suspension of the Woodford Equity Income fund and 36 months since the Financial Conduct Authority launched an inquiry into the scandal affecting 300,000 investors. Star fund manager Nick Train wants to know what on earth the hold-up is, believing the uncertainty is weighing on the shares he holds in Hargreaves Lansdown.

    Speaking at the Frostrow investment companies conference in the City of London yesterday, Train, whose firm Lindsell Train is Hargreaves’ second biggest shareholder with a 12.8% stake, called for those involved in the running and promotion of Neil Woodford’s fund and business to be either ‘sued or exonerated’.

    Train, who holds Hargreaves in his £1.8bn Finsbury Growth & Income (FGT) investment trust and £5.3bn Lindsell Train UK Equity fund, said there was ‘no point in not being transparent and candid’ about the poor performance of the shares.

    Despite operating the UK’s largest retail investment platform, with £132bn of assets under administration and a leading share of the growing market in DIY investing and shares in the FTSE 100, the Bristol-based broker has lost 64% in three years. By contrast the UK stock market is up 13%.

    Hargreaves played a leading role in supporting Woodford (pictured above) when the former star equity income fund manager left Invesco to set up his own business. It invested heavily in the Equity Income fund through its own multi-manager funds and included it in its Wealth 50 recommendations list right up until the fund’s suspension in June 2019.

    Train (), who also runs the £6.9bn Lindsell Train Global Equity fund, said the involvement had hung over the investment platform, noting that the FCA had failed to draw any conclusions or pin any blame despite an ongoing report into the scandal.

    ‘It is three years almost to the month since the suspension of the Woodford fund and we have not been offered any report on the circumstances,’ said Train.

    ‘People who participated in that – to a greater or lesser extent – need to be sued or exonerated. I can see why people are waiting for that.’

    Hargreaves not Amazon
    Train also noted that heavy selling of Hargreaves shares by founders Peter Hargreaves and Stephen Lansdown had held back the stock. The former sold £300m of shares in February 2021, just a year after offloading £550m of stock, while the latter sold more than £250m of shares post-lockdown.

    Train said the selling was ‘not helpful’ to the share price.

    He also criticised the company for failing to invest more in the platform business until this year, choosing instead to reward shareholders with special dividends.

    ‘We are forever badgering Hargreaves to stop paying so much in special dividends and invest more in functionality and opportunities that present themselves to the biggest investment platform in the UK,’ he said.

    ‘There is evidently major opportunities to expand the business… but they need to spend to do it,’ Train said.

    However, the fund manager noted Hargreaves was not given credit when it did invest. In February, the shares tumbled more than 15% when it canned its accustomed additional dividend to plough £175m into a new five-year digital and advice strategy.

    Train said if Amazon had announced a similar investment strategy ‘then the shares would have been up 15% because investors would have rewarded the entrepreneurial spirit.’ The Hargreaves investment was ‘not afforded any value’ because of the previous focus on the special dividend, he said.

    Last December FCA chief executive Nikhil Rathi () told MPs on the Treasury Select Committee that all key evidence had been gathered in the Woodford inquiry and he expected all investigation work to be complete by the end of the year. However, he cautioned that the evidence would be subject to legal review that could necessitate ‘the need for further focused evidence acquisition’.

    Broker’s cash pile
    Meanwhile, Hargreaves Lansdown has accumulated a cash pile of £433m at the end of last year, which could be useful if it receives a fine in this high-profile case, although the execution-only broker will doubtless argue it never advised investors to buy Woodford’s fund.

    Aside from the regulatory uncertainty, Hargreaves’ sliding share price decline mystifies Train. While it has faced growing competitive pressure, the broker has, as the manager highlighted in Finsbury Growth’s results this week, proved remarkably profitable, generating an impressive 50% return on equity, the best in his portfolio.

    From its May 2019 peak of £24.19 the stock has tumbled £15.58 to 861p, down a further 3.2% today, and no longer features as a top-10 holding in Train’s trust or funds.

    Hargreaves’ poor share performance sums up a torrid 18 months for Train who, having outperformed the FTSE All-Share for up to 18 years, has fallen way behind the index as his quality growth style has fallen out of favour.

    Over three years, even with dividends included, Finsbury Growth shares have fallen 7%, compared to the 15% total average return of trusts in its AIC UK Equity Income sector. Nevertheless, he is confident his picks of financially strong global franchises such as Diageo, Burberry and Unilever will re-rate as markets again appreciate their reliability.

    https://citywire.com/investment-tru...hargreaves-shares/a2387819?re=97224&ea=331610
     

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