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Why I’d shun the Barclays share price and pile into this dynamic FTSE 100 share

I reckon life’s too short to invest in Barclays (LSE: BARC). The firm’s regulatory news feed is a mess of never-ending announcements as it seemingly trades everything that moves on the stock market. Finding the firm’s financial information in that lot isn’t worth the effort, so the best way is to visit the investor relations section on the company’s website.

A lacklustre performance 

But here’s what you need to know about the firm: revenue has been stagnant since 2014, earnings per share is forecast to rise, cash flow has been up and down over the past few years, and the share price first hit its current level after the credit-crunch in April 2009. From an investment point of view, Barclays has been disappointing over the past nine years and I expect a similar outcome over the nine years to come.

I find no consolation in the juicy-looking dividend of over 4% or in the firm’s low-looking valuation. Earnings may be rising but that isn’t necessarily going to drive up the share price. Instead, I think a more likely outcome is that the market will mark down the valuation even further to compensate. Barclays is a cyclical enterprise and the stock market is a forward-looking beast. I think the market will try to anticipate the next plunge in profits at Barclays by assigning it an ever-meaner valuation as profits rise.

One day the next cyclical down-leg will arrive, the share price will likely plunge and profits and dividends will plummet. If I were to be holding the shares when that happened, the resulting capital loss from the falling share price would likely wipe out years-worth of dividend gains. So, I’m not taking the risk with Barclays and would rather pile into a dynamic FTSE 100 firm such as Bunzl  (LSE: BNZL).

Consistent and well-balanced growth 

What I like most about the specialist international distribution and services firm is the consistency of its trading record over the last few years. Since the end of 2012, revenue is up 65%, cashflow is around 80% higher, normalised earnings per share has shot up around 110% and the dividend is 75% fatter. Such progress reflects in the share price, which is almost 120% higher over the period. Bunzl has been a great investment for many and has put the meagre returns from the likes of Barclays to shame.

Who’d have thought that such returns could be generated by supplying stuff such as food packaging, grocery, films, labels, gloves, bandages, safety consumables, and products for cleaning and hygiene. It’s not an exciting endeavour but Bunzl provides businesses and organisations with an easy supply of essentials, and there’s money in it, leading to the firm’s steady-but-unspectacular yearly gains in earnings.

Last month’s half-year report revealed more of the financial progress we’ve become used to, and chief executive Frank van Zanten told us in the report that the outlook is positive. He’s expecting organic growth and acquisition activity to drive further financial progress through the second half of the year. I wouldn’t bet against Bunzl now and believe the share is well worth your further research time. 

Buy-And-Hold Investing

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Kevin Godbold has no position in any of the shares mentioned. 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.