Lloyds Banking Group (LSE: LLOY) has had a tumultuous few years and today things got a whole lot worse. On a day that the financial markets saw the FTSE 100 fall over 8%, Lloyds could face an investigation by the UK’s Serious Fraud Office. Along with auditor KPMG, Lloyds has been accused of pushing property firm Angel Group into administration by charging exorbitant advisory fees, according to an article in the Telegraph.
Share price slide
Today the Lloyds share price was down almost 14% on opening. It has a price-to-earnings ratio (P/E) of 6, forecast earnings per share growth of 55%, and its dividend yield is almost 8%. All very attractive fundamentals, which make it look cheap. However, I’m more worried about how much room the Lloyds share price has to fall further. Can it sustain months of suppressed interest rates and a potential recession?
Being a household name and historically established in British banking you’d think it would be one of these institutions that’s too big to fail, but we should never become complacent.
Back in 2008, that’s how most people viewed Lehman Brothers, which subsequently went bust, leaving the financial markets in disarray. This had a knock-on effect in the UK, leading to Lloyds Bank having to rescue HBOS and, in turn, the government having to rescue Lloyds.
As much as I hope Lloyds will survive to see happier times ahead, I don’t like the risk and uncertainty surrounding this share. I’ll be avoiding.
Oil price crash
The price of oil has seen an unprecedented slide today and even the biggest companies weren’t immune to its effects. BP (LSE: BP) saw its share price fall 21%. BP has a P/E of 9 and its dividend yield is over 8%.
I like BP and think it has great potential to succeed in renewables and oil and gas, but I’m not sure this is the right time to be buying oil stocks.
Russia, the US, and Saudi Arabia are slipping into an all-out war on crude oil production and where it will end is anyone’s guess. Combining this with the impact of the coronavirus outbreak means the oil industry is in a weak and uncertain place.
I don’t think the oil industry is about to go bust. The world is far too reliant on energy, and in many emerging countries demand is increasing. But, there’s a glut of oil in storage, so these countries are prepared to deal with a price crash that may only see the strongest survive.
Buy and hold
In my opinion, the strongest oil players in the UK financial markets are BP and Royal Dutch Shell, so if I was buying shares in any oil stocks, it would be these two. My only concern is that the oil price may have further to fall. I don’t see any of these countries bowing down easily.
These are precarious times we are living in and uncertainty is rife. Billionaire investor Warren Buffett once said that “investing is simple, but it’s not easy”. Uncertainty is the reason why.
In an interview this week Buffett confirmed he will not be selling stocks in response to the coronavirus panic but will instead hold. He may even buy bargain shares in companies with a strong track record, likely to go the distance.
It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.
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It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...
It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.
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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.