The stock has been having a tough time lately. But I’m keeping a close eye on it, because it’s close to a price where I might be interested in buying it.
Different from its peers
In general, the UK banking sector has been under pressure lately. I think that makes this a good place to be looking for stocks to buy and Barclays catches my eye for a number of reasons.
The firm is differentiated from its FTSE 100 peers. Where Lloyds and NatWest make most of their money from consumer lending, this only makes up 25% of total income for Barclays.
As well as a strong credit card business, the company also has a large investment banking operation. This is an important difference from other UK banks.
Lower exposure to consumer lending means the company hasn’t benefitted from higher interest rates the way others have. And investment banking globally has been in a cyclical downturn.
As a result, Barclays has been facing headwinds that its peers haven’t. That makes it a bad choice for potential investors with a view to the near future, but I think the long-term prospects are much brighter.
There are a couple of signs that a recovery for investment banking activity might not be so far away. One is the fact that interest rates have stopped rising in both the UK and the US.
Another is companies starting to list on public markets again. There have been a few of these in 2023, indicating that IPO activity might just be restarting again.
I’m pleased to see the company doing well, but I don’t want the price to rise too far too fast. Barclays is on the list of stocks I’m keeping a close eye on and I’d like to be able to buy it at a better price.
As a long-term investor, buying at lower prices should result in better long-term returns.
A lower share price also means a better dividend yield. That’s another reason for hoping the Barclays share price falls.
A stock to consider?
I think Barclays has a unique position among FTSE 100 banks. Its investment banking operations currently look like a drag on earnings, but they could well be beneficial in future.
Investing well often involves buying stocks when they’re out of fashion. And this is definitely true of Barclays at the moment.
The firm hasn’t benefitted from the rise in interest rates the way other UK banks have. But its potential for long-term returns shouldn’t be underestimated.