The ASX legal stocks having a good year in 2020, and those still waiting

Lawyers are known for being expensive and time-consuming. Tough as a client – but perhaps a good thing for shareholders of ASX legal stocks.

Take divorce lawyer firm Australian Family Lawyers (ASX:AFL) for example, which has gained 125 per cent in 12 months.

While shares fell in March, they begun a steady rise after the company told its shareholders it was beginning to see a rise in business.

It predicted COVID-19 would cause a strain too big for families to overcome together, not too dissimilar to the GFC.

Ever since, it has continued to impress investors with solid financial results. Yesterday it reported record high quarterly and monthly revenues as well as a 73 per cent jump in its gross profit.

Australian Family Lawyers (ASX:AFL) share price chart

Another two are accounting firms Prime Financial (ASX:PFG) and Kelly Partners Group (ASX:KPG) which have tax law arms. Both stocks saw good enough financial results to be among the few ASX small caps to pay dividends amidst COVID-19 – although only the latter firm has grown (by 48 per cent in 12 months).

Shine Justice (ASX:SHJ), which specialises in personal injury compensation, is a dividend payer too. It settled 5,600 cases in the 2020 financial year and procured damages above $730 million. It made a net profit after tax of $21.55 million.

Prime Financial (ASX:PFG), Kelly Partners (ASX:KPG) and Shine Justice (ASX:SHJ) share price chart

Other ASX legal stocks haven’t had as big of a boom in 2020.

Arguably the most noteworthy ASX legal stock is one-time large cap Slater & Gordon (ASX:SGH).

Despite delivering $700 million in personal injury compensation and $250 million in class action settlements, it made a full year loss of $1.2 million.

Nevertheless, its shares are up by a modest 10 per cent in 2020.

LawFinance (ASX:LAW) is a company that provides litigation funding. It has an Australian business that provides disbursement funding solutions for legal practices and a US business that pays for treatments for personal injury and nets a return if and when the case is won.

Since COVID-19 hit, shares have not recovered along with the broader market as court proceedings slowed down and with it, lower payouts.

Slater & Gordon (ASX:SGH) and LawFinance (ASX:LAW) share price chart

IP law stocks

The remaining two ASX legal stocks are specialist intellectual property firms – namely $136 million company Qantm Intellectual Property (ASX:QIP) and $1.5 billion company IPH (ASX:IPH).

Earlier this month, Katana Asset Management’s Romano Sala Tenna explained to Stockhead this area of legal practice is particularly lucrative.

“It [intellectual property] is one of those areas of law that has very, very sticky long term income streams,” he said.

“The average client is 10-20 years. Once you do initial work on patents and IP, you’re really a long term partner.”

The companies spent several months in 2019 fighting over competitor Xenith IP (ASX:XIP) before IPH won out.

While both companies are slightly down in the last year, both are profitable and dividend payers. Qantm made $14 million while IPH made $54.8 million.

Qantm told its shareholders when announcing its annual results the disruption caused by COVID-19 and subsequent innovation may be favourable for IP activity.