So far, 2023 has delivered a great start for shareholders in Barclays (LSE: BARC). Since 30 December, Barclays shares are up more than a sixth (+17.6%). Also, they have surged over two-fifths (+41.3%) since their 12 October low.
Barclays shares show recent strength
As I write, Barclays shares hover around 186.56p, valuing the Blue Eagle bank at £29.6bn. Looking at their one-year chart, they’ve zig-zagged like the teeth of a saw.
My wife bought Barclays stock in early July 2022 for 154.5p a share for our new portfolio. They climbed until mid-September, but plunged hard over the next four weeks. Despite this, their recent strong rebound has given us a paper gain of over a fifth (+20.8%).
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Here’s how this popular stock has performed over various timescales:
| Current price | 186.56p |
| 52-week high | 209.17p |
| 52-week low | 132.06p |
| One day | -1.6% |
| Five days | -0.6% |
| One month | +8.7% |
| Six months | +9.9% |
| One year | -10.6% |
| Five years | -6.8% |
While my table shows a near-10% rise for Barclays shares over six months, they are down more than 10% over 12 months. Over five years, they are down nearly 7%, versus a 7.9.% rise for the FTSE 100 index. However, these figures exclude cash dividends, which would add three to four percentage points a year to these returns.
Barclays stock still looks cheap to me
Despite its recently surging share price, Barclays stock looks pretty inexpensive to me. From these fundamentals, the shares appear somewhat undervalued and perhaps unloved:
| Market value | £29.6bn |
| Price/earnings ratio | 6.1 |
| Earnings yield | 16.4% |
| Dividend yield | 3.4% |
| Dividend cover | 4.9 |
At a price-to-earnings ratio of just over six and an earnings yield exceeding 16%, Barclays stock is one of the cheapest in the FTSE 100. And yet it’s a London heavyweight, with a market capitalisation close to £30bn.
Also, the dividend yield of 3.4% is slightly below that of the wider Footsie, which offers a cash yield of around 3.7% a year. But Barclays’ dividend looks rock-solid to me, being covered almost five times by trailing earnings. To me, that’s a massive margin of safety, being one of the highest among UK-listed companies.
2023 could be tough for Barclays
While I’m pretty bullish (positive) about Barclays right now, I’m also very bearish (negative) about the prospects for the British economy this year. Most economic forecasters expect the UK to undergo the worst recession among major economies in 2023. Though we narrowly dodged decline in the final quarter of 2022, I’m sure it will start soon.
Of course, slow, no or negative growth is bad for UK corporates as a whole. And soaring inflation (higher consumer prices), sky-high energy and fuel bills, and rising interest rates are hammering consumer spending. As a result, UK consumer confidence is close to record lows.
As a result of this toxic combination, I expect bank bad debts and loan losses to soar in 2023. That’s bad news for Barclays and its banking peers. But rising interest rates have widened bank margins, delivering billions of pounds in additional net interest income.
In short, it’s not all bad news for Barclays and its shareholders. And I would buy more Barclays shares today — if I had the spare cash, that is!
