Barclays PLC (BCS)
When I axed shares of Bank of America (BAC) from my portfolio, I bought shares of Barclays PLC (BCS) as a foreign banking substitute. After watching the stock for a couple weeks, I entered my position at $50.88 back on September 12, 2006.
Now that I’m up over 20% since my initial purchase, it’s time to take another look at Barclays and find out if I should continue to hold the stock.
4.70% interest in Infrastructure Development Finance Company limited (IDFC)
This is a great investment opportunity for Barclays, which will further diversify their investment banking operations. Taking a quick glance at IDFC’s latest annual report, IDFC plans to profit from India’s robust infrastructure growth, predicted to be around 10% in 2007. IDFC also posted a 38% gain in net operating income.
Ugandan Bank Nile Acquisition
The Nile Bank purchase was a positive one because Uganda has room for GDP and per capita growth. The Ugandan economy is experiencing a recession, which is why the Barclays acquisition makes perfect sense. The 100% stake in the African bank will provide a unique opportunity for Barclays to reach the Ugandan banking consumer. Barclay’s interest in Uganda looks like a wise decision.
Along with the newly purchase stake in IDFC, these are two nice additions to the Barclays foreign investment portfolio.
Fundamental Outlook: Strong PEG ratio, Low P/E Ratio
- PEG Ratio is around 1.00 - The $100 billion English bank has managed to keep EPS growth stable and profitable. Projected at 12% for the next 5 years, Barclay’s must continue to increase net deposits, interest in their iShares investment options, and stakes in profitable foreign banks, particularly in developing countries.
- Shares trade at 14 times trailing twelve months earnings. BCS stock still looks cheap to me, even though BCS shares recently broke a new 52-week high. I’ve adjusted my new price target to $65. I think BCS still has room to run.
- 2.61% dividend yield - Not a bad yield for a growth stock in the banking sector.
Decision: Hold.
The outlook is bright for Barclays. This is one of my long-term stock plays. If shares spike in the next few weeks, I’ll add to my position.
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First, nice play here- Barlcay’s has been on a great tear.
I do think, however, that there are some ’sexier’ bank plays abroad that will outperform BCS (unless perhaps we see a merger)… e.g. I think you’ll continue to see Banco Bilbao (BBV) outperform it in 07- jmo
Also, wondering what you’re waiting to see short term before extending your long position? Seems like you have a pretty solid opinion on the stock long, why not buy in now. I don’t see any possible “tipping point” technical indicators that would signal any more of a long term gain then they already do currently…
This is a really interesting topic, particularly for UK investors. Nice blog too. I think I’ll be spending a few days here!
Lucas - BBV just acquired another US bank to cater to the fast growing Southern US Hispanic contingent. You hit the nail on the head in terms of their stock performance. We will continue to see gains from them. Now, I got to review BBV stock over the weekend.
As for BCS shares, I would love to buy in, but I’m strapped for cash at the moment. College can get expensive!
Slapmatt - What UK stocks do you hold? This will give me some ideas for future stock reviews.
Good call on Barclays - they announced record profits yesterday.
I have UK share holdings in Sainsburys (UK supermarket), Marks and Spencer (UK retailer) and HSBC amongst others. Would be very interesting to hear your opinion on those and others!