Buying Barclays (BCS)

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November 20, 2007 | Stocks | | Author Asif

There is a reason Barron’s started this article about British bank Barclays (BCS) with the sentence “it’s too early to pronounce Barclays’ stock cheap” and the reason is that no one really knows for sure just how many more subprime related write downs are going to occur as the banks “mark their portfolios to market”.

However given Barclays globally diversified structure, strong business units and a remarkable dividend yield of over 7%, I think that Barclays may be a buy at these levels. There is obviously the risk that the rest of the financial sector may drag the stock lower in coming weeks or that Barclays may find out that its mortgage portfolio is worth less than it estimated. Hence I am going to start a small position in both the SINLetter model portfolio and my personal portfolio today and may add to it later based on how the stock and the sector behave.

I would have liked to expand on my reasons for buying Barclays but I only have a few hours before I catch a flight to India. While a lot has changed since I wrote about Barclays last December and when I sold it from the SINLetter model portfolio in August 2007 for a small profit, you can still read my original analysis of Barclays here.




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Comments

  1. Raja
    January 3rd, 2008

    Asif, welcome back. Hope your trip to India was action-packed and thoroughly enjoyable. Perhaps the best Christmas vacation so far. Did you visit the BSE? Glad to see the MNST option turn green (grin!). Wish you and all the SINLetter folks a fabulous 2008!

  2. Asif
    January 3rd, 2008

    Thanks. It was an outstanding trip indeed. I was in Mumbai but did not visit the BSE. I did however visit a few stock brokerage firms and will post my impressions in the next newsletter due out this weekend.

    I am glad to see the MNST option back in the green as well. It has been ocsillating back and forth for a while now. Since we have until March 2008 before it expires and I think there is more downside risk than upside potential, I am going to let it ride for now.

  3. Blair
    January 18th, 2008

    Re: BCS dividend: Today, Yahoo reports a 8.1 % dividend whereas TDAmeritrade reports a 5.13 % . Do you know the source of the difference?

    I looked at a few other financial research pages and found Ford Equity Research, S&P Reports, Jaywalk Reports and Seeking Alpha all have a high dividend but Barron’s Report a low one same as TDAmeritrade. Strange?!?!

    blair

  4. Asif
    January 19th, 2008

    Blair, I faced a similar issue when trying to figure out the dividend yield for Unilever (UL). To figure out what their real yield was I had to go through their annual report and compute it myself. It turned out that Yahoo Finance had the right number for Unilever and the numbers published on some of the other financial websites were incorrect.

    I will try to compute the dividend yield for Barclays and post the results here when I get a moment.

  5. blair
    July 12th, 2008

    Asif,

    The higher yield that yahoo quotes appears to be the correct value. I bought Barclay’s last Fall and checked my statement recently. Shockingly, the yield is now at ~15 %. In your recent letter, you mentioned Umpqua’s CEO planned to keep his yield, any news about Barclay’s keeping thier high yield?

    blair

  6. Asif
    July 12th, 2008

    Thanks for the update Blair. I have been enjoying the nice dividends too but given that the stock has lost almost half its value since last November, the dividends are bittersweet.

    I have not heard anything about Barclay’s cutting their dividend. They did however dilute all of us existing shareholders by raising nearly $9 billion in new capital and the stock is near its 10 year low established in September 1998. If we are not at the bottom for financial stocks, we are very close. But then again bottom picking is a very painful activity in the short-term. After waiting patiently for months for Umpqua (UMPQ) to stabilize, the stock is down an additional 18% since we picked it for the model portfolio just two weeks ago.

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