Should You Add LPL Financial Holdings (LPLA) to Your Portfolio Now?


Baron Funds, an investment management company, released its “Baron Asset Fund” third quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund (institutional shares) declined 2.07% compared to a 0.65% decline for the Russell Midcap Growth Index. Differences in sector weights led to the underperformance of the fund in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2022.

Baron Funds discussed stocks like LPL Financial Holdings Inc. (NASDAQ:LPLA) in the Q3 2022 investor letter. Based in San Diego, California, LPL Financial Holdings Inc. (NASDAQ:LPLA) is an integrated platform provider for brokerage and investment advisory services. On October 21, 2022, LPL Financial Holdings Inc. (NASDAQ:LPLA) stock closed at $238.52 per share. One-month return of LPL Financial Holdings Inc. (NASDAQ:LPLA) was 7.76% and its shares gained 36.38% of their value over the last 52 weeks. LPL Financial Holdings Inc. (NASDAQ:LPLA) has a market capitalization of $19.027 billion.

Baron Funds made the following comment about LPL Financial Holdings Inc. (NASDAQ:LPLA) in its Q3 2022 investor letter:

“We established a position in LPL Financial Holdings Inc. (NASDAQ:LPLA) during the quarter. LPL is the largest independent broker-dealer (IBD) in the U.S. The company uses technology to help independent financial advisors run their practices more efficiently and serve their clients more effectively. We believe that LPL is a beneficiary of secular growth in the demand for financial advice, and a shift among financial advisors away from large banks (also known as wire houses) towards independent models. As the largest IBD, LPL is well placed to continue taking share in this market, as it can offer advisors high-quality technology, a range of business models, and best-in-class incentives. Additionally, LPL is a beneficiary of rising interest rates because it can earn a yield on the uninvested cash balances held in client accounts.

As Americans continue to seek financial advice, the total pool of assets that are managed by financial advisors continues to grow. Traditionally, most financial advisors worked as salaried employees at wire houses. Over time, advisors have begun to favor independent models, in which they become the owner of their own advisory practice. This model allows advisors to retain far more of the revenue they generate and greater flexibility over how to run their business.

As the largest IBD, LPL can invest more than its competitors in developing the technology that allows advisors to run their practices efficiently. Beyond technology, LPL has developed a range of different advisor models that allow the advisor to outsource as much of their practice operations as they choose, and thus provides advisors a high degree of flexibility as they make the transition to independence. LPL’s scale allows it to spread these significant costs over a $1 trillion-plus asset base. Crucially this ability to manage costs also allows LPL to pay industry-leading economics to its advisors, who can earn payouts of over 90% of the revenue they generate. The combination of these benefits enables LPL to continue recruiting more assets onto its platform, which in turn reinforces these scale advantages…” (Click here to read the full text)

Should You Add LPL Financial Holdings (LPLA) to Your Portfolio Now?

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LPL Financial Holdings Inc. (NASDAQ:LPLA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 47 hedge fund portfolios held LPL Financial Holdings Inc. (NASDAQ:LPLA) at the end of the second quarter, which was 47 in the previous quarter.

We discussed LPL Financial Holdings Inc. (NASDAQ:LPLA) in another article and shared Artisan Partners’ views on the company. In addition, please check out our hedge fund investor letters Q3 2022 page for more investor letters from hedge funds and other leading investors.

 

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Disclosure: None. This article is originally published at Insider Monkey.

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