The Motley Fool

The HSBC share price is up over 25% in the past month. Should I buy now?

Image source: Getty Images

Many beleaguered stocks have rallied due to the Covid-19 vaccine news in recent weeks. HSBC (LSE:HSBA) shares are widely held therefore many existing investors have benefitted from its recent rally. The fact that the HSBC share price is up over 25% in the past month makes me wonder whether now is a good time for me to buy.

Share price on the up

Prior to the market crash, the HSBC share price reached nearly 600p per share. When the Covid-19 pandemic hit, its shares tumbled. At its lowest point, shares were trading at 283p per share at the end of September. That meteoric drop equates to an over 50% reduction in price. Despite the woes HSBC experienced, I believe it was an accurate depiction of the world economy and market conditions.

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...

Why I am tempted to buy shares

HSBC’s price-to-book value (P/B) is fairly low compared to levels prior to the market downturn. I do not expect it to remain low for much longer. I think it will continue to rise as the share price rises, coinciding with market conditions normalising. The Covid-19 vaccine has instilled a sense of hope across the world that this could be sooner rather than later.

The HSBC share price is tempting, as the company may resume dividends in 2021 too. 2020 was a year to forget for anyone who owned UK bank shares. Very early in the year, the Bank of England (BoE) banned all UK banks from paying any dividends to investors. The reasoning behind this was that banks would need as much capital as possible to support the dwindling economy during a global crisis the likes of which we had never seen. As for 2021, it has been reported that the BoE and major banks are discussing a dividend deal. Based on that, the consensus 2021 forecast for HSBC’s dividend is 27 cents per share. That equates to a healthy yield of over 5%.

HSBC share price: my verdict

I believe HSBC is a potential good opportunity right now but it carries some risk. There is talk of a second recession which could be disastrous for the UK economy and the banking sector too. That said, I feel a recession will only delay any recovery for HSBC and not stop it in its tracks.

All the talk of resumption of dividends is based on analysts’ forecasts and I have learnt that these don’t always come to fruition. Again, if the economy does not bounce back, the BoE may decide to ban dividends in 2021 too. It is important to note that HSBC is undergoing a restructuring. This restructure will see it move capital away from the US and European arms. Instead, this capital will be moved to its most profitable centre, which is Hong Kong. Furthermore it is reducing headcount and there is a general consensus among experts that this is needed as it was overstaffed.

The HSBC share price is one I am seriously considering right now at its current price levels. I do believe it will recover and could even pay a dividend next year. Across the FTSE 100, HSBC has been one of the best dividend payers and I hope it regains this status in the future. In the meantime, here is another stock I really like, which also has some risk attached to it.

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!

Jabran Khan has no position in any shares mentioned. 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

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.