In spring last year, I was full of the joys of the buying opportunity that was Barclays (LSE: BARC) (NYSE: BCS.US).
As its share price plunged to 232p in March, I loudly proclaimed that “Barclays has slipped even deeper into buy territory”.
I wrote a string of articles on the stock at the time, claiming that “the worse Barclays gets, the more I want to buy it”.
Was I right to stick my neck out?
Barclays Bitten
One year ago, Barclays was having a tough time of it. Profits at its investment banking arm had collapsed, as regulatory demands were squeezing it out of Wall Street.
In Europe, it was facing a costly financial transactions tax. At home, chief executive Anthony Jenkins had stumbled into a major row over fat banker bonuses.
His costly overhaul Project Transform had yet to bear fruit, and the public still loathed Barclays, forgetting that it didnât need a taxpayer bail out in the financial crisis.
Worse, its share price had just hit an 18-month low, and was a depressing 5% lower than five years earlier.
On The Contrary
All of which made Barclays look like a great contrarian opportunity to me. I concluded: “You could wait for it to get cheaper, but frankly, it looks like a buy today.”
And it did get cheaper, before a moderate recovery finally kicked in. Today, Barclays is trading at 262p.
That’s a rise of 13% I wrote those words at the end of last March, against under 5% on the FTSE 100.
Most of the action came in the last six months, when Barclays outperformed the other UK banks, and most European banks as well.
It now trades at 0.8 times book value, up from 0.6 times before.
Which is good, although hardly the stuff that makes fortunes.
Get With The Programme
Barclays, like the banking sector generally, remains a stock in recovery. It keeps lapsing into bad habits, with the seemingly endless stream of mis-selling and rate-rigging scandals.
Its investment banking arm continues to wither, stunted by regulation, and in urgent need of radical surgery that management seem reluctant to perform.
At 10.3%, at least its capital position is stronger. And the yield is returning to respectability: currently 2.5%, but forecast to hit 3.7% later this year, and 4.7% at the end of 2016.
I wasn’t wrong to big up Barclays last year. And if you want exposure to UK banks it is trading at an undemanding valuation. I reckon it is still a buy today.