Buying Barclays and Its 7% Yield

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.

Comments

[YoungMoney:]

and if shareholders' equity shrinks... is the dividend stable?

2007 Nov 21 09:40 AM

[jcrash:]

I've noticed that Barclays has a top 5 position in MOST of the high flying stocks (name 5, check them all) in the US market. Now, I'm not sure what that says, but I do know that all those stocks are down 20% or so in the last month.

That is a few billion in losses, minimum, by my numbers.

I think there is an effort to make up the subprime losses in the market and they are now getting it both "coming and going".

I'd look for 2x the writedowns next quarter, but I might just be thinking up conspiracy theory stuff.

2007 Nov 22 12:44 AM