The Motley Fool

Why I think it could be time to pile into Lloyds Bank shares

If you’ve been watching the Lloyds Banking Group (LSE: LLOY) share price and looking for a good entry point, it may have arrived.

From a valuation perspective, the stock has a lot going for it right now. Indeed, through 2019, earnings plummeted. And City analysts predict massive further falls in profits during 2020. The forward-looking earnings multiple is almost 19, when measured against expected 2020 earnings.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The valuation indicators have lined up

That’s much higher than the single-digit rating we’d previously become used to. And that’s a good thing if you’re looking for value in an out-and-out cyclical stock. Indeed, a high rating after a plunge in earnings and a fallen share price is what we should be hunting for.

Meanwhile, the price-to-book value is just below 0.5. That’s also a good indicator of value, suggesting we could be near a cyclical bottom for the business. And I’m also encouraged by the consolidation on the share price chart now that it looks as if it could be trying to turn up. After plunging in February and March, the stock has been bouncing around and trading broadly sideways ever since. Indeed, it could have found its bottom in the current cycle.

Those City analysts are certainly optimistic. They’ve boldly pencilled in a treble-digit recovery in earnings for 2021. And I’m encouraged by the situation on the ground as well. Lockdowns are lifting, and we’ve yet to see a meaningful second peak of Covid-19 anywhere in the world. Summer is here. Perhaps we’re on the way to winning our global battle against the virus.

And governments everywhere seem determined to ensure the crisis of the pandemic won’t be followed by an economic crisis that crushes us. They’re throwing everything at the problem, including the search for a vaccine. But some investors fear a second stock market crash because of the recession we’ve entered.

The market moves to confound the many

However, the higher the number of people fearing a second crash, the less likely it is to happen. Why? Because that can be a ‘thing’ with the stock market, and I can’t fully explain it. But time and again, I’ve seen the stock market move to confound the expectations of the many.

So, perhaps those City analysts’ expectations for a sharp rebound in Lloyds’ profits next year will prove to be correct. The share price looks like it wants to shoot up to me. I think the move could be rapid because bank shares tend to be leading indicators – first into and first out of recessions. If you wait until we see recovery in the real-world economy, it’ll likely be too late for buying shares in Lloyds Bank.

However, I wouldn’t attempt to buy and hold shares in Lloyds for the long term. Although this could prove to be one of the most attractive buying points in years, as ever, we won’t know for sure until later. There’s no certainty when investing in cyclical shares.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Kevin Godbold has no position in any share 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.