The Beginners’ Portfolio: Shall We Buy Barclays PLC or Standard Chartered PLC?

Are Standard Chartered PLC (LON: STAN) and Barclays PLC (LON: BARC) the best banks?

| 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.

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

The Beginners’ Portfolio is a virtual portfolio, which is run as if based on real money with all costs, spreads and dividends accounted for.

We had some cash sitting in the Beginners’ Portfolio from the sale of Vodafone, and combined with the dividends we had received so far that gave us enough for two new investments. Half of it has already gone to top up Rio Tinto, and for the other half I’m seriously considering a bank.

I know banks produce accounts that are fiendishly difficult to understand, but one of my favourite pieces of advice for beginners is “Don’t over-analyze”. So as long as the portfolio remains diversified, I think we could improve our prospects by adding a bank now.

I’ve narrowed it down to two — Barclays (LSE: BARC) (NYSE: BCS.US) and Standard Chartered (LSE: STAN) (NASDAQOTH: SCBFF.US).

Barclays

barclaysWe’ve just had results from Barclays, and a decline in investment banking led to a quick fall in the share price of 3.5%, to 265p. Overall, the shares are just short of breaking even over the past 12 months.

But hopefully we’re coming to the end of an erratic couple of years, and there’s some serious growth currently forecast for the next two — Barclays shares are on a trailing P/E of 16 based on these latest results, but that should drop to under 8 within two years if those forecasts are close. Here’s what they look like…

March EPS Change P/E Dividend Change Yield Cover
2014 29.7p +78% 9.3 10.1p +55% 3.7% 2.9x
2015 35.6p +20% 7.7 14.2p +41% 5.2% 2.5x

Who wouldn’t want some of those recovering dividends?

Standard Chartered

standard charteredMy other choice — Standard Chartered — is rather different. Where Barclays and others were hammered by the banking crisis and recession in the Western world, Standard Chartered remained aloof, with the bulk of its business in the East and less than 5% of profit coming from Europe and the Americas.

But that advantage has turned a little sour as Chinese growth has faltered, and there are fears of a double-whammy from bursting property and lending bubbles. Current forecasts, which are perhaps optimistic on those counts, look like this…

March EPS Change P/E Dividend Change Yield Cover
2013 125p -9% 10 52.8p +2.9% 4.3% 2.4x
2014 138p +10% 9.0 57.2p +6.3% 4.6% 2.4x
2015 150p +9% 8.3 61.9p +8.2% 5.0% 2.4x

With Standard Chartered shares down more than 25% in 12 months, those P/E valuations and dividend yields also look attractive.

But which is better?

We’re really comparing a proven current performance from Standard Chartered, together with the possible risk from China, against possible jam tomorrow from Barclays, but with the fear that the blighted bank is not properly back on its feet yet.

Which will we plump for? Watch this space!

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.

> Alan does not own any shares in Barclays or Standard Chartered. The Motley Fool owns shares in Standard Chartered.

More on Investing Articles

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Up 35% from this year’s low! Here’s where I think Lloyds shares are headed in H2 of 2024

My Lloyds shares are already doing well this year but that’s not guaranteed to continue. What factors could turn the…

Read more »

Investing Articles

Approaching £5, is there still growth ahead for the Rolls-Royce share price?

The Rolls-Royce share price has been flying in the last year. But is there more growth ahead or should investors…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Could Raspberry Pi be a growth share to buy and hold?

Our writer explains why he thinks a newly-listed UK growth share could have a bright future -- and considers whether…

Read more »

A pastel colored growing graph with rising rocket.
Market Movers

The FTSE 100 jumps after the Bank of England meeting. Here’s what’s next

Jon Smith runs over the takeaways from the Bank of England meeting today and flags up which FTSE 100 stocks…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

How I’d start investing in great value UK shares with £10,000 today

Harvey Jones can see a heap of UK shares he'd like to add to an ISA today. Many combine low…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

Why did the YouGov share price just crash 37%?

The YouGov share price has been weak for a while. But that's nothing compared to what happened after this profit…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

YouGov shares collapse 37%! What’s going on with this AIM stock?

Our writer takes a look at why YouGov shares fell dramatically today and assesses whether this might be a chance…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Earnings up almost 15%! Is it time to seriously consider this FTSE 250 stock?

Ongoing recovery and growth in this high-performing FTSE 250 business means there may be more to come for investors.

Read more »