Barclays (LSE: BARC) shares have been at the top of my shopping list for months. So why haven’t I bought them already?
FTSE 100 banks have had a brilliant run, and I have exposure through Lloyds Banking Group, which has done very well. But I’m dead keen to add Barclays to my SIPP too.
Banks are a core part of the global economy, generating strong profits, offering decent dividends and share buybacks, and have growth potential too. Barclays would balance Lloyds nicely too. Lloyds is heavily focused on the UK, making most of its money from mortgages and domestic lending. That gives it stability, but also ties it closely to the health of the UK economy.
Top FTSE 100 opportunity
Barclays has investment banking operations in the US and beyond. That offers greater diversification and potentially higher returns, but also adds risk.
After a strong run, the price-to-earnings ratio climbed to above 15. I thought I’d missed my chance to get Barclays at a decent price. Then two things happened. First, in February, Barclays reported a strong set of results. Earnings jumped, driven by its investment bank and improved income across divisions. Pre-tax profit climbed 13% to £9.1bn. The P/E fell and a new £1bn share buyback programme gave me another incentive to buy.
Second, we’ve got war in Iran. Barclays is among the bigger fallers, down 18.5% in the last month. But that’s further reduced the P/E, which now stands at just 8.7. That’s a tempting entry point.
Long-term performance remains strong. The shares are up roughly 25% over one year and about 175% over three years, with dividends on top.
So why haven’t I bought it yet? Because there are risks. Quite a few, in fact. The most obvious is the geopolitical backdrop. If oil prices keep rising and we slide into a global economic slowdown, that won’t be good for banks. Barclays, with its international exposure, could be more vulnerable than some.
There are also concerns about potential bubbles. Artificial intelligence and private equity have both been flagged as areas of excess. If AI continues to surge, it could disrupt traditional industries, potentially leading to loan impairments. If it stalls instead, as higher borrowing costs bite, lenders could be hit from that direction too.
Investing for the long-term
Private equity is another worry. Barclays has exposure here, and could be vulnerable if that sector implodes. All of which helps explain why I’ve hesitated.
The shares remain volatile. I almost bought them on Wednesday (18 March), but I’m glad I didn’t. Next day, they dropped almost 4.5%, before recovering slightly on Friday. So what do I do?
I can’t sit around waiting to catch the exact bottom. That’s almost impossible. The best I can do is drip-feed money in over time, building a position gradually rather than going all in. It’s not easy, given the uncertainty. But if the situation in Iran stabilises, the shares could bounce back quickly.
Now here’s the key. I’m not buying for the next few months anyway. Ideally, I’ll hold Barclays for the rest of my life. And with a long-term view, it’s always a good time to buy shares. There are plenty more FTSE 100 bargains I’ll buy in the same way.
