I’m trawling for additions to this year’s Stocks and Shares ISA and simply can’t get past Barclays (LSE: BARC). I’m dead keen on the FTSE 100 bank, but have a nagging doubt: is this the wrong moment to jump in?
Five years ago was a cracking time to snap up Barclays. The shares are up 196% since then. Even buying 12 months ago would have been smart. The stock’s climbed 56.5%, with a 1.87% trailing yield thrown in.
We all know past performance is no guide to the future, but can’t help drawing conclusions anyway. When I see a run like that, my personal instinct is to think the fun must stop soon. Probably when I press the buy button.
Smashing the FTSE 100
Normally, I hunt for beaten-down shares instead and hope they’ll do what Barclays has just done. Yet momentum can be hard to resist, and Barclays has bags of it. So, what do the experts say?
Seventeen analysts have crunched the numbers and come up with a one-year median price target of 535p. If they’re right, that’s almost 16% up from today’s 462p. Obviously, that’s a slowdown, but it’s still a solid return if it happens. Forecasts are just educated guesses.
Of 19 analysts giving stock ratings, 13 call Barclays a Strong Buy, one more says Buy, and five say Hold. No Sell ratings. Clearly, I’m not alone in fancying Barclays’ chances.
Many of those calls were probably made before the full-year results on 10 February. They were solid enough with annual profits up 13% to £9.1bn, in line with forecasts but failing to beat them. The board also unveiled a new £1bn share buyback and pledged to return a mighty £15bn to investors over the next two years. I fancy getting my share of that.
These are funny times for markets. Barclays talked of harnessing AI to drive efficiency, but right now that can just as easily spook investors as excite them.
Handsome shareholder rewards
For me, the big attraction is that Barclays has an international reach. It should complement my stake in Lloyds Banking Group, which is focused on the UK. Last week’s results confirm the value of this, as Barclays’ corporate investment banking divisions outperformed, while its UK retail banking and wealth management operations disappointed. Of course, this also raises the stakes if global markets become volatile.
All the FTSE 100 banks face two big challenges right now. First, expectations are sky-high, as recent success drives up valuations. A week or so ago, Barclays’ price-to-earnings ratio was pushing 17. However, with 2025 numbers now factored in, and the shares falling 5% in a week, that’s down to a far more tempting 10.4.
Second, banks have feasted on higher interest rates, which allow them to widen net interest margins, the gap between what they pay savers and charge borrowers. With rates likely to fall further, margins are likely to narrow. To answer my own question, yes, I’m afraid I am a little late here. But given its international footprint and growth prospects, I still think Barclays is well worth considering with a long-term view. Better late than never.
