The Motley Fool

Why I would buy Barclays plc today and hold it forever

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.

2017 has seen another washout for investors in Barclays (LSE: BARC), and heaven knows they have had plenty of those lately. Its share price has fallen almost 20% in the last 12 months, and still trades 15% lower than it did five years ago. Hopes of a rebound have been continually frustrated, and investors have little dividend income to distract them either. Currently, it yields a meagre 1.52%.

Stress tested

Barclays is now the most unloved UK bank. Lloyds Banking Group and HSBC Holdings are both up around 5% this year, while Royal Bank of Scotland is up more than 25%. I wish I could say the market had got it wrong and the stock is misplaced, but there is a good reason for this. The latest Bank of England stress tests showed Barclays has the lowest margin for error among the big banks, trading at a price-to-book value of just 0.67%. This means that in the unlikely event that the bank was wound up, that is the return shareholders would get for each share they held. RBS’s book value is notably stronger at 0.9%, which rises to 1.22% with Lloyds and 1.33% with HSBC.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Throw in today’s underpowered dividend, which compares poorly to the 3.82% you get from Lloyds today (although you should get much more in future) and 5.46% from HSBC, and you can see why investors struggle to feel the love. Barclays may trade at an apparently bargain forward valuation of 12.5 times earnings but there is clearly a good reason for that. Global banking stocks may have rallied in 2017, Barclays hasn’t. Again, with reason. However, I have argued before that it could still make you brilliantly rich.

Future proof

Anyway, 2017 is almost over. I am looking to 2018 and beyond, and call me a foolhardy optimist but I believe things should start to get better for the bank from here. Its earnings per share have fallen in three out of the last five years, including a whopping 60% drop in 2013 and 22% drop last year. However, City analysts are predicting a brighter future, with a 21% rise across 2017, and an even juicier 29% rise in 2018.

Barclays is wriggling free of its legacy issues, albeit at a slower pace than investors hoped. It finalised its exit from Barclays Africa Group on 1 December, for example, which means most of the writedowns are now over and done with. It has appointed non-executive directors  to the board of its new ring-fenced bank, Barclays Bank UK PLC, and can now start to sweat its more productive investment banking assets.

Cry freedom

A string of one-off charges, adjustments and writedowns have dragged on the bank’s profitability and this may continue for a while, but eventually it will break free. If 2018 isn’t the year, it will come in 2019, or 2020. Long-sighted investors may as well buy it now, before the brighter prospects are baked into a higher share price.

Today’s yield is covered a hefty 5.2 times, giving plenty of scope for progression. The income is forecast to hit 3.2% by 2018 and hopefully will kick on from them. If you plan to buy and hold Barclays forever, I would buy it today.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, HSBC Holdings, and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.