Why I think the Barclays share price is an opportunity to play the FTSE 100’s weakness

Barclays plc (LON: BARC) could deliver stronger returns than the FTSE 100 (INDEXFTSE: UKX).

| 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.

The decline in the FTSE 100 has been significant over recent months. In fact since May, it’s down by around 13%, which reflects deteriorating investor sentiment.

Of course, while a correction is painful in the short run, it could create buying opportunities for the long run. I think stocks such as Barclays (LSE: BARC) now appear to offer wide margins of safety, which could lead to improving total returns in the long term.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Clearly though, some cheaper shares may be worth avoiding due to the risks they face. One such stock released a trading update on Monday after a challenging period.

Uncertain prospects

The stock in question is Safestyle UK (LSE: SFE), the manufacturer and retailer of PVCu replacement windows and doors. It has experienced significant financial challenges in recent months, largely due to a weak operating environment. This contributed to a fall in its share price of around 50% in the last year.

But the company’s update also showed an improved sales order intake since its Commercial Agreement with its co-founder Mitu Misra was delivered in October. It has seen a substantial increase in its contracted workforce across its canvass, sales, surveying and installation operations. It has also invested more than expected in lead generation, commissions and associated overheads. These are due to benefit its performance in the 2019 financial year.

Despite the potential for improving profitability, Safestyle UK faces a challenging operating outlook. Spending on non-essential items is weak at present, and this situation could continue as the Brexit process continues. As a result, it may be a stock to avoid, in my opinion.

Improving outlook

The FTSE 100’s fall could mean, though, that there’s now a number of buying opportunities around. The Barclays share price has dropped by 24% in the last year as investors have become increasingly concerned about the outlook for the world economy. That’s unsurprising, since the threat of a global trade war and the possible impact of rising US interest rates could hold back the financial performance of global businesses.

As a result, the margins of safety on offer could be wider than they have been for a number of years. This could create buying opportunities for long-term investors – especially since global GDP growth is expected to be around 5% per annum over the medium term. This suggests that while there are risks, the underlying prospects for global stocks could be stronger than investors are currently anticipating.

Since Barclays has a price-to-earnings growth (PEG) ratio of 0.7, it appears to offer growth at a reasonable price. Although there could be further falls in its share price ahead, investors who are able to look at the long-term prospects for the business and the wider economy may be able to generate improving returns from buying while the stock trades at a low ebb. From a risk/reward perspective, the bank could be highly appealing despite the uncertainty that it faces.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. 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.

More on Investing Articles

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here’s a FTSE 250 stock to buy to benefit from the construction boom!

Jabran Khan details a FTSE 250 stock that could be primed to benefit from the infrastructure and construction boom.

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Is the Royal Mail share price a buying opportunity?

With a 6% dividend yield and a price-to-earnings ratio of 3, is the Royal Mail share price in buying territory?…

Read more »

Scene depicting the City of London, home of the FTSE 100
Investing Articles

3 FTSE 100 shares! Should I buy them?

I'm searching for the best FTSE 100 stocks to buy following recent market volatility. Are these blue-chip UK shares too…

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Should I buy one of the cheapest shares on the FTSE 100 index?

This Fool explores one of the cheapest stocks on the FTSE 100 index by share price and decides if he…

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

With trading suspended, where could the Eurasia Mining (LON:EUA) share price go next?

This morning, the EUA share price was suspended pending an announcement - so could improving sales send the share price…

Read more »

Hand holding pound notes
Investing Articles

Are the FTSE 100’s top income stocks a bargain?

The FTSE 100 is renowned for its value and dividend stocks. So, are the index's top income stocks worth a…

Read more »

Compass pointing towards 'best price'
Investing Articles

Scottish Mortgage shares have slumped 40%. Time to buy now?

Scottish Mortgage Investment Trust (LON: SMT) shares have rewarded shareholders well in recent years. I'm thinking of buying now they're…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

3 recession stocks I’d buy in a hurry

With the economic outlook getting worse, our writer highlights a trio of recession stocks he would consider buying for his…

Read more »