Should I Buy Barclays Plc?

Should Harvey Jones bank on Barclays plc (LON: BARC)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m shopping for shares right now, should I pop Barclays (LSE: BARC) (NYSE: BCS.US) into my basket?

Bargain Barclays

There have been some great opportunities to buy Barclays in the past five years. You could have bought it in March 2009 at a sale price of 65p, and found yourself with a six-bagger by October, when it topped £3.60. You could have bought it for around £1.50 in autumn of 2011 and again in summer 2012. Today you pay £2.81. Should I buy Barclays at that price?

If you like buying big companies on weakness, this stock could be for you. Barclays is down nearly 14% since late May, when it traded at £3.25. It should be powering ahead as the UK approaches escape velocity, but the return to normality was always going to be bumpy. Markets are still hooked on QE, and interest rate hikes could spark a wave of repossessions among indebted homeowners. Ultra-loose monetary policy basically saved the banks in March 2009, they banks still aren’t ready to save themselves.

Qatar in its throat

Barclays has been working hard to transform its culture, fluff up its capital cushion, cut impairments, restructure its operations, and, importantly for investors, revive that dividend. Project Transform still has some way to go, as the PPI omnishambles and other mis-selling scandals keep popping up. The Serious Fraud Office is currently investigating the injection of private Qatari capital in 2008, which may have been borrowed from, um, Barclays.

Lehman may be a dirty word, but it isn’t at Barclays, which bought the stricken investment bank in September 2008. Recent first-quarter results showed investment bank profits rising 11% to £1.32 billion, although current volatility could prevent a quick repeat. Some analysts worry that new CEO Antony Jenkins lacks investment banking experience, although his predecessor Bob Diamond was probably too full of it.

Every time a banker trousers a £1 billion bonus, or is forced to give it back, the press and public remembers why it still hates them. That hasn’t stopped the Barclays share price leaping 60% in the past 12 months, despite recent slippage. As a universal bank, it remains integral to the UK economy, and too big to fail. Its current yield of 2.3% is below the FTSE 100 average of 3.6%, but that will recover, given time.

Risk on!

Barclays is still risky. S&P has just trimmed its credit rating due to “tighter regulation, fragile global markets, stagnant European economies and rising litigation risk stemming from the financial crisis”. But at 8.1 times earnings, most of the risk is in the price. Forecast earnings per share (EPS) growth is an anaemic 3% in 2013, but hits a protein-rich 19% in 2014. By then, the forecast yield is 3.4%. You don’t have to like Barclays, but you do probably have to buy it. Now could prove a good time.

If it’s income you’re after, you might want to go shopping for Motley Fool’s favourite stock pick. Our analysts have singled out this FTSE 100 favourite because it offers a sky high yield and great growth prospects. To find out what it is, download our free guide Power up Your Portfolio. It won’t be available much longer, so click here now.

> Harvey doesn’t own shares in Barclays.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Investing Articles

2 FTSE stocks that demonstrate the best (and worst) of the AIM market

Our writer looks at the performance of two very different FTSE stocks that highlights the pros and cons of investing…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With a P/E ratio of 8 and selling for pennies, is this FTSE 250 share a bargain?

Christopher Ruane digs into a cheap-looking FTSE 250 share that sells an iconic product and considers whether it's really a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Could the stock market crash in 2025?

Our writer considers some possible drivers for a stock market crash. Rather than try to time it, he's wondering how…

Read more »

Investing Articles

Why do so few people build a passive income?

For those putting a little money away, far more choose savings accounts over aiming to make a passive income from…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Could putting £20,000 into FTSE 100 stocks get me monthly passive income of £2,756?

The FTSE 100 is full of dividend shares offering generous returns. Our writer considers how much income he could generate…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing For Beginners

At fresh 52-week lows, is this the best value stock in the FTSE 250?

Jon Smith considers a value stock that's currently at low levels due to recent news, but he feels it shouldn't…

Read more »

Investing Articles

The Burberry share price rises on takeover rumours. But I still don’t want to buy

Speculation about a possible takeover sent the Burberry share price higher. However, our writer’s steering clear of the luxury fashion…

Read more »

Businesswoman calculating finances in an office
Investing Articles

With the rise in Barclays’ share price, £2k invested 5 years ago is worth this much

City analysts predict robust earnings increases ahead for Barclays, so can the upwards momentum of the share price continue?

Read more »