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In July 2022, my wife and I purchased barclays (LSE: BARC) at 154.5 pence per share, for our family portfolio. Turns out I wasn’t prepared for how volatile Blue Eagle bank stocks have been this month!
Barclays stocks are far from boring
After the 2020/21 pandemic panic, I got used to thinking that FTSE 100 bank stocks were getting ‘boring’. How wrong I was!
Here’s how the Barclays share price has performed on seven different time scales:
| Actual Price | 139.78p |
| One day | -2.0% |
| Five days | -1.9% |
| One month | -18.1% |
| year to date | -11.8% |
| Six months | -11.3% |
| One year | -17.0% |
| Five years | -32.3% |
Barclays shares have lost value over all seven periods, ranging from one day to half a decade. Over five years, they have plummeted by nearly a third, another blow to long-suffering bank shareholders.
Also, this popular value has gone on a real roller coaster of late. Recently, on March 8, the share price reached a 52-week high of 198.86 pence. By Monday (March 20), it had collapsed to a 52-week low of 128.12 pence.
At the current price of 139.78 pence, this stock is now 9.1% above Monday’s low. Even after this comeback, the shares are down 29.7% from 15 days ago. That’s volatility for you.
Would you buy more Barclays shares?
To date, we are sitting on a paper loss of almost one-tenth (-9.5%) on our stake in Barclays. Of course, I would be delighted if we had sold on March 8. However, I am a long-term value/dividend/income investor and not a short-term trader. When it comes to deciding whether I think Barclays stock is still a good buy at these price levels, I want to consider a number of things.
Firstly, Barclays is currently worth £22.1bn. To me, that seems like a modest price for a UK Big Four bank. However, Barclays has a large investment banking arm, whose earnings can be highly volatile.
I also want to see the fundamentals of the bank’s stock, shown here:
| Price-earnings ratio | 4.7 |
| earnings performance | 21.3% |
| dividend yield | 5.2% |
| dividend hedge | 4.1 |
At first glance, it seems to me that Barclays must be one of the cheapest stocks in the FTSE 100. After all, this stock’s price-earnings ratio below five translates to an earnings yield of over 20%. In addition, these stocks offer a dividend yield of more than 5% per year, covered more than four times by earnings. Again, this seems like a wide margin of safety to me.
These numbers don’t tell the whole story though, as they are based on final (historic) earnings. While UK banks made big profits in 2022, this year will be much tougher.
In fact, with the UK economy weakening, the UK may enter a recession in 2023. In this scenario, I would expect bank profits to fall, driven by rising bad debts and credit losses.
Then again, I expect a lot of this negative news to be already factored into the discounted Barclays share price.
So I’d happily buy more today – if I had some extra cash, that is!
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