Dear Mr. Berko: I'm 77 and still mentally sharp, so I feel silly that I have to send you this email. What do you think of Barclays' stock? I'm considering the purchase of 5,000 shares for my account. My stockbroker, who has been a close friend of mine for several years, doesn't like the stock, and I'm not comfortable going against his opinion. He and I have been reading your column for more than 20 years, and he respects your opinions. I can afford the risk, so if you like the stock, I won't have to go behind his back to buy Barclays.
- HD, Erie, Pa.
Dear HD: Barclays PLC (BCS-$8.38), founded in 1895, is a British multinational financial services company that's more commonly known as a very large bank. BCS is home-ported in London and helmed by CEO Jes Staley, a brilliant 59-year-old American banker who joined J.P. Morgan at age 25, ultimately becoming its CEO. In December 2015, Staley joined BCS with the expectations that his impressive management skills at running JPM would be duplicated at BCS. Staley will be spending a good deal of time building capital, carefully streamlining operations, eliminating numerous redundancies, improving communications and reducing staff, all with a goal to make BCS among the most efficient and profitable publicly traded banks. Staley will sell many of BCS' non-core businesses, including its difficult African operations. Staley will also reorganize BCS' important investment banking operations, which in the past were poorly managed and had difficulty controlling costs. Staley is also revitalizing retail operations - including British credit cards, personal loans, individual checking accounts, wealth management and business banking - most of which were eschewed by previous management in favor of the glory of international investment banking.
Last year, BCS - with $1.6 trillion in assets, $347 billion in commercial loans and $28 billion in revenues - lost 12 cents a share. And some analysts forecast a 15 percent decline in 2016 revenues as BCS begins to exit numerous non-core assets to focus on capital costs. Meanwhile, core revenues are coming in flat, though the anticipated fallout from Brexit has been a huge yawn. If BCS earns 79 cents a share this year as Standard & Poor's expects, then the 38-cent dividend, yielding a comfortable 4.4 percent, won't be reduced again. And when BCS is finally free from the drag of its non-core assets, Wall Street expects better earnings in those years ahead.
I think you're on the right track, and if a wise lady like you can afford the risk, then take a shot at it and buy 5,000 shares. BCS, as you probably know, traded in the low $60s before the market tanked 10 years ago and traded in the high $10s until late 2015, when the U.K. began making Brexit noise. BCS has more than 22 million "retail" customers and more than 1 million business clients. There are operations in more than 40 countries, employing 130,000 people. And I think a 5,000-share purchase of BCS is a jim-dandy classic wager on a beaten-down, trashed but gilt-edged world-class security that will continue to be a part of Britain for another 100 years. I believe that in the coming decade, BCS will regain much of its previous glory, improve its dividend and trade in the mid-$30 range.
At 77 years young, a lady should not have to hide a purchase from her broker. That's silly. Frankly, I don't think it's a good idea to have a broker who is a close friend. More than you know, good friendships are ruined by bad business decisions. If you can afford to risk $41,900 on a stock, you should employ a money manager to make those portfolio decisions. At age 77, perhaps it's time to let a knowledgeable, wise, experienced and caring professional make those investment decisions for you. I'm older than you, and 10 years ago, I hired a money manager to run a large portion of my individual retirement account. And my wife and I are very pleased.
By the way, your broker may charge a $450-$650 commission on your purchase, but Schwab would charge $8.95.
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Published: Thu, Oct 20, 2016
