The Motley Fool

This FTSE 100 share is down 60% since December. I’d be a brave, bold buyer today!

These days, when scanning for bombed-out shares in the FTSE 100, there is no shortage of candidates. After all, with the Footsie down roughly 1,430 points (18.8%) this year, few shares have avoided steep falls.

Warren Buffett’s business wisdom

Furthermore, 33 years as an investor has taught me that falling share prices are good for buyers (but not sellers). However, before I’m tempted to buy any FTSE 100 faller, I ask myself this vital question: “Despite its plunging share price, is this still a sound business run by competent managers?

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...

This question was shaped by two wise comments from billionaire investor Warren Buffett. He remarked: “I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” And: “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

This FTSE 100 share has taken a beating

If a FTSE 100 company’s share price has crashed, but it remains a sound business, then I’m eager to buy its shares. This is true even at the point of maximum pessimism. Take, Lloyds Banking Group (LSE: LLOY), for example, whose shares have taken a beating worthy of a world heavyweight boxing champion.

As I write, Lloyds shares trade at 29.36p, up 0.94p (3.3%) today. Over the past year, shares in the bank are down more than two-fifths (40.7%). Even worse, Lloyds shares peaked at 73.66p on 13 December last year, so they have collapsed 60.1% from their 52-week high.

Then again, the stock recently bounced back from its lows. On 31 July, just 12 days ago, the Lloyds share price dived to close at 25.43p. For me, this was a real bargain-bucket price for Lloyds. And its share price has since climbed 15.5%.

Is Lloyds a bad business run by bad managers?

Before buying its shares, I must ask: Has the Lloyds share price crashed because it has become a bad business run by bad managers? If so, then perhaps its ultra-low share price reasonably reflects this FTSE 100 company’s future prospects.

I can honestly say that, on balance, there is no reason to believe that Lloyds has become a ‘bad bank’. Unlike, say, in spring 2005, when I warned that Northern Rock and Bradford & Bingley had become rogue lenders selling ‘mad mortgages’ – and look what happened to both!

This FTSE 100 share can’t be valued on fundamentals

Of course, being a huge lender during the UK’s steepest economic decline for 300 years exposes Lloyds to huge risks. Before the coronavirus crisis is over, Lloyds might have to put aside maybe £10bn to cover bad debts. It has already set aside £3.8bn in loan-loss provisions for the first six months of this year.

But I’m absolutely sure that Lloyds will survive this downturn, because its balance sheet today is way, way stronger than during the global financial crisis of 2007–09. I happen to believe that, eventually, this FTSE 100 firm will return to profit and resume paying healthy dividends to its shareholders.

Finally, despite being the UK’s largest financial-services group, Lloyds has a market value today of just £20.1bn. For me, that’s too small for a decent business and market leader. I’d be a big, bold, brave buyer of its shares today for the long run!

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Cliffdarcy 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.