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If you're looking for ideas for a stocks and shares ISA, surely it's better to buy shares in big companies when they're cheap, right?
I would absolutely say yes to that, but with two big caveats. First, we really need to be sure that we have found a truly great company. And two, we have to be able to distinguish the good ones from the ones who deserve to be down.
One thing that means is that almost never They consider any investment possibility as a no-brainer. But I think it is entirely possible to weigh the possibilities of Lloyds Banking Group (LSE: LLOY) without the need for brains like billionaire investor Warren Buffett.
Up, but still cheap?
In fact, Lloyds' share price is up 30% in the last 12 months. And it has almost returned to positive territory in five years. But that's still underperformance. FTSE 100 since the beginning of 2020.
And Lloyds is a mere shadow of its former self before the banking crisis of 2008. But it's no use remembering those old days. No, we have to look at the very different Lloyds of today.
So how can I value the bank as a stocks and Shares ISA candidate for 2025 and beyond?
I'm going to go back to Warren Buffett again.
Rule number 1
Buffett's first investment rule is “never lose money.“And his second, famous rule is”Never forget rule 1.“
So what things could cause Lloyds shareholders to lose money in 2025? I think the biggest fear is the problem of mis-selling auto loans. So far, Lloyds has set aside £450m to potentially cover its obligations, but other than that it is remaining tight-lipped on the matter.
Some observers believe it could ultimately cost Lloyds up to £1.5bn. It looks like we will have to wait for the annual results due to be published on February 20 to hear the updated view of Lloyds' board.
The other thing that seems to worry investors is interest rates. Falling rates should mean tighter margins for mortgage lenders. But the other side of the coin should be more borrowers and fewer defaults.
A price jump from Lloyds today (January 16), when it emerged that December inflation figures were lower than expected, appears to show that markets are positive about the possible effects.
Against the crowds
The rise in Lloyds' share price could make it look like the crowd is behind it. But it is far behind the progress that Barclays and NatWest Group have done in the last 12 months. And I would say that's because of the fears that I've observed here.
So I think the best time to consider adding a company to a stocks and Shares ISA might be when it faces its greatest short-term uncertainty. As long as we are convinced that he can overcome it and has a positive long-term future. Oh, and the price is right.
It's nowhere near an obvious rule, and it's not for the faint-hearted. It's for investors who don't mind going against the crowd. Sound like Warren Buffett once again? I rate Lloyds as one to consider for a 2025 ISA.
