Hargreaves Lansdown PLC’s (LON:HL.) shares were steadier on Tuesday following the recent plunge in reaction to the controversy surrounding former star stockpicker Neil Woodford as Numis Securities upgraded its rating for the investment platform operator to ‘add’ from ‘hold’.
The City broker also increased its target price for the FTSE 100-listed firm to 2,084p from 2,054p, with the shares edging 0.3% higher to 1,919.50p in morning trading having dropped by over 16% in value over the past month.
In a note to clients, Numis’ analysts pointed out that: ”HL has been criticized for having Woodford as part of its Wealth 50 list. While the fund has underperformed, we would urge investors to view the HL list of funds in a similar manner to any portfolio.”
“The Wealth 150, which HL has provided for its clients, has a long history of delivering value, but as with any portfolio, from time to time there will be a position that underperforms.”
The analysts added: “Relative to benchmark, HL has outperformed since inception, but has underperformed by 0.9% over the last year. Our key point is that we believe that 'Best Buy lists' are valuable for clients and that HL doesn't have a performance issue.”
They said: “Furthermore, we believe HL has done the right thing in passing its fees while the fund remains closed, as well as asking Woodford to suspend its own fees on its clients' behalf.
The analysts concluded: “We believe HL is a structural growth story for potentially decades to come. We believe HL offers the ideal combination of rapid growth combined with a high operating margin, exceptional customer persistency, high cash conversion, low capital utilisation, low earnings risk and it holds a dominant market position.”