Azora Capital chief investment officer Ravi Chopra has pitched wealth manager LPL Financial as his stock pick for the Sohn Hearts & Minds conference.
Miami-based Chopra, who specialises in US financial stocks, believes the market’s fears about AI destroying LPL’s profits are overdone.
LPL serves 32,000 advisers with $US2.5 trillion of assets and makes profits from the idle cash of its customers, earning a spread between the rate it pays and the interest it earns in money market floats.
The company trades at 7 times earnings because the market is “that in the future, AI agents will be able to move cash out of customer accounts into higher yielding alternatives and take those profits with them.”
“What we believe the market is missing is that financial advisors have already optimised client cash.”
Chopra says the company’s multiple can double from the “lowly seven times back to its historical levels of 13 or even higher.”
LPL, which has a $US25 billion market capitalisation, slid 3.4 per cent overnight and is down 17 per cent this year.
His pitch is music to the ears of financial advisers who fear they will be replaced by AI.
“Humans have a trust advantage that dwarfs that of AI, and it holds true in every age cohort,” he said. “One thing we believe that’s hard to replicate is human-to-human trust.”
This article was originally posted by Australian Financial Review here. Licensed by Copyright Agency. You must not copy this work without permission.
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