The stock market has been falling for quite a while now and the share prices of many companies have continued to move down. However, I see this more as an opportunity than a threat. Let’s see why I’ll be buying these two FTSE 100 shares soon.
Winning through greater volatility
Shares in Hargreaves Lansdown (LSE:HL) have been volatile recently. In the past year, they’re down 48.5%, while in the last three months they’ve fallen 11.5%. At the time of writing, they’re trading at 813p.
The asset management firm saw a noticeable boost in business during the pandemic. This was primarily due to heightened interest in the stock market as more people worked remotely or were furloughed.
What’s more, greater market volatility provided the company with an opportunity to increase profit margins through the wider spreads provided to customers.
To that end, for the year ended June between 2020 and 2021, revenue grew from £550m to £631m. However, pre-tax profit declined slightly from £378m to £366m. This is something I’d like to see reverse in the future.
While there is the obvious risk from the broader economic environment, the business reported client growth of 90,000 for the four months to 30 April. Its client retention rate was also solid at 92.4%.
However, there is no guarantee that this rate of growth will continue in future, of course.
In addition, it had net new business of £2.5bn, indicating that the firm has the potential to grow even further.
A retail recovery?
Second, the Next (LSE:NXT) share price is down 17.6% in the last year, while it’s up 12% in the past three months. The shares are currently trading at 6,580p.
The clothing retailer was hit hard during the pandemic as its shops were forced to close. Unsurprisingly, for the year ended January 2021, pre-tax profit slumped to £342m from £748m the year before.
The firm is now dealing with further issues, like wage and cost inflation. These have the potential to hit future balance sheets.
Due to the uncertain economic outlook, however, both Credit Suisse and Deutsche Bank cut their price targets on the shares, from 8.025p to 6,450p, and from 9,250p to 7,850p, respectively.
On the other hand, for the 13 weeks to 30 April, sales grew by 21.3% year on year. More specifically, store sales rose by 285%, showing the benefit of being able to have shops open again.
Furthermore, the company expects full-year pre-tax profit to increase by 3.3%.
Overall, the shares of both businesses are down markedly in the past year. For me, this presents an interesting buying opportunity to load up on these two firms before the market rebounds and potentially moves the share prices higher. I’ll be adding both companies to my portfolio soon.
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Andrew Woods 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.