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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One stock to keep an eye on is Barclays (BCS). BCS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.15. This compares to its industry's average Forward P/E of 9.74. BCS's Forward P/E has been as high as 7.39 and as low as 5.59, with a median of 6.51, all within the past year.
We should also highlight that BCS has a P/B ratio of 0.45. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.33. Over the past 12 months, BCS's P/B has been as high as 0.46 and as low as 0.32, with a median of 0.40.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BCS has a P/S ratio of 1.36. This compares to its industry's average P/S of 1.74.
Value investors will likely look at more than just these metrics, but the above data helps show that Barclays is likely undervalued currently. And when considering the strength of its earnings outlook, BCS sticks out at as one of the market's strongest value stocks.
https://finance.yahoo.com/news/jes-staley-looks-toward-next-105530849.html
Barclays "best of bunch" as it defies Brexit and beats Wall Street
BARCLAYS enjoyed a record third quarter at its investment banking arm as the UK lender more than held its own against Wall Street giants such as JPMorgan and Goldman Sachs. Chief executive Jes Staley has long fended off calls to ditch the investment bank, insisting that a diversified strategy would be best for shareholders. With 40% of revenues in dollars, Barclays is protected against Brexit turmoil and the pound's weakness, unlike its peers Lloyds and Royal Bank of Scotland.
Staley said: "Those questions around the bank's strategy have become a thing of the past. "The American firms are exceptionally good at what they do, but we have demonstrated that we can compete." The investment bank pulled in fees of £688 million for advising on deals including the London Stock Exchange's purchase of Refinitiv and Ovo Energy's bid for SSE's retail arm.
The strength in banking helped total revenues rise 8% to £5.5 billion, well ahead of City expectations. The shares rose 2% to 170p. Last night Barclays ditched a controversial plan to stop its customers from withdrawing cash at Post Offices after an outcry from MPs and the Daily Mail. Staley said the shift to digital banking meant few customers were angry, but admitted the bank may have misjudged the wider mood.
Profit before tax for the quarter fell 83% to £246 million due to a £1.4 billion provision for dealing with last-minute payment protection insurance claims. Staley said an "avalanche" of claims, most of them spurious, has kept 10,000 staff busy opening envelopes. The latest
set-aside takes Barclays' total PPI bill to £11 billion. Ian Gordon at Investec said Barclays is now the "best of the bunch", and the only UK banking stock worth buying. Nicholas Hyett at Hargreaves Lansdown said: "It's just one quarter, but this is exactly the picture Jes Staley wants to paint. A resilient UK bank is cutting costs and keeping bad loans to a minimum, generating a reliable income stream. Meanwhile, the corporate and investment bank is putting the icing on the cake."
Staley said there are signs of Brexit-related caution from personal and corporate clients, with cash balances rising. "M&A is fairly soft," he said. "Strategic decisions at board level are restrained, so there is clearly an economic impact from the uncertainty around Brexit.
The Barclays (LSE:BARC) share price is almost 10% higher in the last month after hitting a three-year low of 136p in August. But can the FTSE 100 stalwart really deliver strong longer-term growth to double your money?Barclays’ third-quarter results are due out on 25 October so the moves we make today could either deliver a huge boost to our portfolios or lose us a lot of money.Confidence high?What the Barclays share price does have in its favour is the confidence of the market. According to shorttracker.co.uk and the FCA’s daily short positions monitor, none of the major hedge funds are currently betting on the bank’s share price to go down.Considering the Brexit issue, when Boris Johnson delivered positive noises on a possible deal, Lloyds and Royal Bank of Scotland saw double-digit leaps in their share price.Barclays is not as dependent as Lloyds on a Brexit deal for its future fortunes though. The bank has much more of a worldwide customer base and so is insulated to a certain extent from the volatility caused by British political turmoil.Numbers tell a storyYet the Barclays share price has been under severe pressure in the last 18 months, trending steadily downwards from a 217p peak in April 2018.First-quarter results for 2019 showed a pre-tax profit of £1.5bn, down £200m from the year before as the firm slashed bonuses for its investment bankers.Litigation charges against it could jump again. July saw Barclays named as one of five multinational banks, including RBS and JPMorgan, to be hit with a £1bn class action-style lawsuit for allegedly rigging pricing in foreign exchange markets.Younger rivalsInvestors who have held Barclays shares over the last five years are down 36%. I think it’s tough to see where future growth is coming from to deliver a turnaround in the Barclays share price.The epic rise of the digital-only UK challenger banks like Revolut, Monzo and Starling point to a new mobile-first banking world where Barclays is starting to look like a dinosaur. And the investment banking side of it has not performed well to deliver growth either.In fact, earnings per share are expected to dip significantly lower by the end of 2019 before bouncing back in the early part of 2020, according to a consensus of City analysts.Activist investor Edward Bramson, who tried and failed to get a seat on the board earlier this year, has continued his stinging criticism of the bank’s “destructive” and poorly-performing investment division.Also a concern are the firm’s self-inflicted wounds. These include a heavily criticised decision to drop an agreement allowing customers to freely withdraw cash from Post Offices. The move will only save around £7m and as the only bank out of 28 rivals to pull out, Barclays will lose much more than it gains.Buy or sell?A
The Barclays (LON:BARC) share price has risen by 11.5% over the past month and it’s currently trading at 167.12p. For investors considering whether to buy, hold or sell the stock, the question now is whether this price run will continue.
According to the company’s analysts, there are certainly reasons to think it will continue to perform well in the year ahead. In terms of trading recommendations, Barclays currently has:
5 Buy recommendations
8 Hold recommendations
1 Sell recommendations
This suggests that analysts are generally positive about the outlook.
Interestingly, at its current price, shares in Barclays are trading at a discount of -8.84% to its 52 week high price.
While analyst forecasts can be a useful guide to what City 'experts' think about a stock's near term future, they can be unreliable. To get a better idea about the strengths and weaknesses of Barclays it's worth doing some investigation yourself.
There are all sorts of factors that could affect Barclays's share price this year – we simplify them into easy to understand scores with our Stockopedia StockReport. Click here to take a look at the StockReport for Barclays – you might discover some surprising things you didn’t know.
He may have lost the battle for a seat on the board, but activist investor Edward Bramson hasn't given up on forcing change at Barclays just yet.
The bank, run by American Jes Staley, is due to release its third-quarter results on Friday and it could spell another blow for Bramson.
Through his investment vehicle Sherborne, Bramson has taken a 5.5 per cent stake in Barclays, and has been pushing for an overhaul of the bank's investment banking arm, which he believes has failed to deliver for shareholders in recent years.
But Barclays looks set to post a rise in turnover and profits this week from its Corporate and Investment Bank, with pre-tax profits at the division expected to have jumped 43 per cent to £714million in the period from July to September this year. Your move, Ed.
SELL SIDE August 5, 2019 12:04 PM GMT
Barclays confirms gain of around $20 billion in Deutsche Bank prime balances
Jes Staley said Barclays has gained roughly $20 billion from Deutsche Bank as it targets growth of prime brokerage business.
By Hayley McDowell & Joe Parsons
Barclays has confirmed it has gained roughly $20 billion in prime brokerage balances from Deutsche Bank, as the investment bank looks to expand its hedge fund services.
Following a report from Reuters on the Deutsche prime brokerage gain, Barclays’ group CEO Jes Staley told analysts on the bank’s second quarter earnings call that it had won business from a former Deutsche Bank client, adding the prime brokerage business is becoming an important factor for its markets division.
“It is true that we gained some prime balances recently, roughly in that neighbourhood,” Staley said. “It’s very good business for us, obviously it’s net interest earnings. It’s part of the markets business where you earn revenue on Saturdays and Sundays and holidays, so it’s quite a business. It also reinforces the important relationships you have with principal actors in the capital markets.
“It is very profitable and we will continue to pursue that business. I’d say overall, our commitment to the capital markets globally, but principally in New York and London and across Europe, will reflect when capacity is leaving the capital markets in terms of intermediaries. We’re committed to the strategy and the prime brokers business is an important component to that.”
According to Reuters, the $20 billion worth of client business that Barclays has gained from Deutsche Bank includes $10 billion from a single client that it already has a relationship with. The client allegedly opted to move its activities to Barclays after Deutsche Bank confirmed its exit from the business.
The British bank has firmly established itself in the middle ranks of the industry prime brokerage league table, and has made several moves to bolster its US business in order to challenge the incumbent providers.
Last year, Barclays recorded the fastest growing equities franchise out all of the top investment banks, after seeing revenues rebound 43% to $827 million. This was largely due from increased business from hedge funds. Speaking to The TRADE’s sister publication, Global Custodian, last year, Barclays’ head of US prime services sales, Betty Gee, explained how prime brokerage and financing has become catalyst for its growth story.
“We have seen the prime brokerage business moving from a one-size-fits-all approach to a more tailored model accommodating more bespoke solutions,” said Gee.
A report from Bloomberg last year highlighted Barclays had also won some business from hedge fund giant Renaissance Technologies, which was also a former Deutsche Bank client.
Meanwhile, the German bank is in the process of transitioning around $160 billion of its prime brokerage balances and electronic execution tec
The growing threat of a hard Brexit has prompted many investors to steer clear of British banks. For Barclays Plc Chief Executive Officer Jes Staley, a rupture with the European Union could turn out to be a handy lifeline.
Staley, who has focused on reviving the U.K. lender’s investment bank, has set himself a profitability target for 2019 and 2020 that the market still isn’t convinced the company will be able to meet.
Pressures on revenue and margins in the first half have given the U.S. executive no choice but to lower his goal for expenses this year. But pledging to preserve client-facing jobs and income-generating roles at the investment bank may be a difficult promise to deliver on. Something will have to give.
At 9.4% in the first half, return on tangible equity surpassed Staley’s target of more than 9% for the year, though it was significantly below the 11.6% in the six months through June 2018. While revenue in the second quarter was relatively steady – down 1% to 5.5 billion pounds ($6.7 billion), costs rose by about 6% as the firm cut 3,000 jobs and closed branches.
Staley is counting on being able to cut variable compensation and prune investments in projects like digital upgrades to reduce the annual cost base to below 13.6 billion pounds. It may not be sufficient.
Margin pressure is hurting the firm’s U.K. activities, which account for about 30% of revenue. Consumers are refinancing mortgages at the fastest pace ever, locking in rates. Meantime, the bank has become more prudent on its domestic unsecured lending, according to Staley, even if the bank isn’t yet seeing weakness in the U.K. consumer.
The banks’ markets division, a unit that Staley has sought to rebuild, also had a tough quarter. Fixed-income trading income rose 2% before a one-time gain, beating estimates and Wall Street peers. But revenue from equities trading – a business Staley wants to grow – fell by 14% from a record quarter in 2018. Crucially, though, the stock unit still lagged U.S. competitors and remains well outside the group of five top firms considered to be the only profitable ones in that business.
Investors will be comforted that the bank increased the dividend and remained committed to stock buybacks, as and when appropriate. A weaker pound, down almost 4% against the dollar in July on fears of a hard Brexit, could also be a boon. While it may make cost-cutting tougher, UBS Group AG analysts estimate that half of Barclays’ investment banking revenue and the majority of its international card sales are in dollars.
Staley’s reign atop Barclays since 2015 has been anything but plain sailing. After facing regulatory scrutiny for trying to unmask a whistle-blower, he came under attack from activist investor Edward Bramson, who failed to win a board seat in May.
The CEO says he is confident he can meet the returns target for this year. That looks to be a challenge. If he fails, though, the economic damage and distraction of a no-deal
Today’s half-year results report has not moved the Barclays (LSE: BARC) share price much. It’s up about 2.5%. as I write.
I think there are sound reasons for the muted response from the market. If you strip from last year’s numbers the effects of litigation and conduct issues on profits, the underlying profit before tax actually plunged by just over 16% compared to the equivalent period last year.
Top-line income (revenue) also eased back by 1.3%. It seems to me that if Barclays underlying financial numbers were recovering before, they’ve slipped back again in the six-month period to 30 June. But the directors put a brave face on things and slapped 20% on the interim dividend anyway.
There may be trouble ahead
However, I reckon there was also a warning shot or two in the report’s commentary. The income environment in the first half was “challenging,” it said. And the company has hunkered down with the aim of reducing costs for the remainder of 2019.
Chief executive James E Staley explained in the report that progress building its mortgage and deposit balances had been gobbled up by “increased levels of customer refinancing and lower interest earnings from UK cards balances.” The outcome was that the overall reduction in net margin had only been “partially offset.”
So, as well as revenue and profits, the profit margin moved backwards in the period too. These are not the kind of figures I like to see from an enterprise that’s supposed to be in a state of recovery and moving towards growth.
And the stock market continues to keep the valuation pegged low. At the recent share price close to 158p, the forward-looking earnings multiple for 2020 sits at about 6.6 and the anticipated dividend yield runs above 5%. The price-to-book value runs below 0.5 too. Nearly every metric you look at screams ‘cheap’!
A rational response from the market
But I think the stock market has got it right with Barclays. Before it’s a recovery or a growth prospect, it’s overridingly a cyclical enterprise. Banks are among the most cyclical of all stocks you can buy, with the performance of their underlying businesses linked closely to the health of the macroeconomic environment.
Indeed, if the economy dives, I’d bet my last pound that Barclays’ share price will plunge too, along with profits and the dividend – despite the firm’s apparent cheapness. So, to me, it’s rational that the stock market is incrementally marking down the firm’s valuation as the profits in the underlying business rise. The stock market is doing its ‘thing’ and looking ahead. And with the cyclicals, little profits follow big profits – that’s why we call it a cycle.
Lloyds Banking Group referred to a deteriorating macroeconomic picture this week too. And well-known fund manager Neil Woodford expressed his view that the world economy is in a more fragile state than stock market valuations would suggest. I’m seeing traces of gathering economic storm clouds, so will continue t
Deutsche Bank confirms plan to cut 18,000 jobs
Deutsche Bank will cut 18,000 jobs over three years as part of a radical reorganisation of the German bank.
It will also report a second quarter loss of €2.8bn to partly pay for the shake-up, which will significantly shrink its investment banking business.
Deutsche Bank is yet to specify exactly where jobs will be lost.
But it said it intends to completely exit activities related to the buying and selling of shares, much of which is conducted in London and New York.
With almost 8,000 staff, London is the home to its biggest trading operation.
Deutsche Bank said it will cut its global workforce to 74,000 by 2022 and that the restructure will cost €7.4bn over the next three years.
"Today we have announced the most fundamental transformation of Deutsche Bank in decades," chief executive Christian Sewing said.
"This is a restart for Deutsche Bank... In refocusing the bank around our clients, we are returning to our roots and to what once made us one of the leading banks in the world," he said.
German banking giants abandon merger talks
Deutsche Bank raided over money laundering
The reorganisation of the business follows the failure of merger talks with rival Commerzbank in April.
The German government had supported the tie-up, hoping it would create a national champion in the banking industry.
However, both banks concluded that the deal was too risky, fearing the costs of combining might have outweighed the benefits.
What's bad for Deutsche Bank could be good for Barclays.
The once-mighty German firm's retreat from international investment banking leaves Barclays as the last European bank standing in a sector dominated by US giants like Goldman Sachs, JP Morgan Chase and Morgan Stanley.
As one Barclays insider told the BBC: "Deutsche is where Barclays was five to 10 years ago. The difference is that we had a successful retail business (loans, mortgages, credit cards) to help us endure the most difficult times. Deutsche Bank hasn't got that."
The structure of the German banking sector is very different from the UK with lots of smaller regional banks grabbing most retail customers.
Barclays has been picking up market share from Deutsche and other European banks for over a year now and will see this as a further opportunity to expand into the space vacated by the German retreat.
While Barclays may pick up business, the real victors from Deutsche's demise are the US banks who have prevailed after many unsuccessful attempts (RBS, UBS, DB and others) to muscle into the so-called "bulge bracket" of international investment banks.
Wall Street is arguably more powerful than ever.
Deutsche Bank has been struggling for years with the decline of its investment bank and has made several attempts to revamp its business.
The latest plan will be the most ambitious so far and it has already prompted the resignation of one top executive.
On Friday, the bank announced that its head of investment bank
Barclays shares must do this to begin a proper recovery
by Alistair Strang from Trends and Targets | 27th June 2019 08:53
Still nursing wounds a decade after the Financial Crisis, here's what our chartist thinks of Barclays.
Barclays PLC (LSE:BARC)
Sometimes we rabbit on about "horizontal trends" and nowhere is the feature quite as demonstrated as Barclays (LSE:BARC) share price since 2011. We've shown it with a purple line on the chart, though perhaps it may be Magenta.
Spoiling the story, the colour conflict had nothing to do with The Battle of Magenta, especially as the dye was discovered in 1859 and named in honour of the event. It is interesting to note the leader of French forces was actually of Irish descent, his family driven out of Ireland due to English property confiscations, opting to settle in France. Patrice de MacMahon (Paddy to his mates) eventually became President of France!
Aside from a whimsical wander through history, along with an ongoing in-house debate regarding Purple or Magenta, we should really discuss what's happening (or rather not happening) with Barclays share price.
Last time we reviewed it, we waxed lyrical about the dangers of 148.823p, if the share had the temerity to close below this level.
Such a disaster has happened three times in the last week, salt being rubbed on the wound by the price also trading below 147p (apparently the final drop trigger) for a few hours.
Yet, the price has not plunged into the abyss of doom, instead appearing to find some sort of excuse for a bounce.
Alas, this is where the purple (or magenta) line comes into play, a horizontal trend dating back eight years and one we'd ignored, due to Barclays share price habit of dipping below this 147p line, only to recovery sharply thereafter.
Only in 2016 - following the Brexit vote (circled) - did the price conclusively dip below this line but once again, sharply recovered. It's important to accept therefore this trend can be broken.
The situation now, from a big picture perspective, is of weakness below 146p now entering a cycle down to an initial 134p. Secondary, when broken, is a bottom, hopefully, of 114p.
To a degree, it feels we are clutching at straws, perplexed Barclays has avoided the opportunity to drive off a cliff. The answer to our confusion doubtless lies with politics and political uncertainty as we await white smoke coming from 10 Downing St chimney to tell us which bus driver has been anointed to actually steer the nation.
Currently, Barclays share price requires above 162p to suggest it has actually bottomed, in doing so entering a region where a cycle to 175p should commence. If bettered, a longer term 192p is now possible.
If we adhere to our "normal" rules, we must accept 114p looks like the eventual drop target.
Source: Trends and Targets Past performance is not a guide to future performance
Alistair Strang has led high-profile and "top secret" software projects
Fund managers bypass banks in meeting with CEOs - WSJ
Jun. 26, 2019 10:24 AM ET|About: Bank of America Corporation (BAC)|By: Liz Kiesche, SA News Editor
A group of fund managers is banding together to organize a series of private conferences where their analysts get to meet CEOs of the companies in which they invest, the Wall Street Journal reports, citing people familiar with the matter.
That threatens millions of dollars that Wall Street banks make each year for introducing their investor clients to the managers in whose companies they own stock.
Fidelity Investments, Capital Group, Wellington Management, T. Rowe Price Group (TROW +0.1%), and Norway's government fund are planning such conferences on their own, the people told the WSJ.
The conference being organized by the five firms could threaten popular conferences hosted by banks including Barclays (BCS +1.3%) and Bank of America (BAC +0.9%).
Corporate access has been one of the few cash cows left for banks and their research arms as companies increasingly borrow straight from loan funds, without hiring a bank to underwrite and place the debt. Also, solo advisers help them design complex derivatives for much less that what Goldman Sachs (GS +0.6%) or JPMorgan Chase (JPM +1.2%) would charge.
Barclays believes a market "melt-up" could be on the horizon if three things materialize in the near future: A trade truce, Federal Reserve rate cuts and the economic slowdown only being a soft patch.
The so-called melt-up refers to a sharp move higher driven by investors late to the game looking to get in on a momentum shift. It is often a sign of a late-stage bull market.
A melt-up "is indeed possible, but would require a confluence of several outcomes: 1)Trade tensions decrease substantially; 2) The Fed eases aggressively; 3) The current industrial slowdown remains a soft patch and does not morph into a full recession," Maneesh Deshpande, head of equity derivatives strategy at Barclays, said in a note Tuesday. "Although this is not our most probable scenario, we acknowledge that its likelihood has increased."
The last time I covered the Barclays (LSE: BARC) share price, I concluded that, despite all of the problems facing the business, the stock could ultimately be worth 80% more than its value at the time “when Barclays finally gets its act together.“
More than a month on, and I still believe shares in the bank could double from current levels, even though activist investor Edward Bramson recently failed in his attempt to get Barclays’ management to shake up the business and prioritise shareholder returns.
Legal troubles
There’s no denying the bank has struggled to recover from the financial crisis. Even though a decade has passed since the entire UK banking sector was brought to the brink, Barclays just hasn’t been able to shake off its past issues.
Indeed, only a few weeks ago, it was fined €210m by the EU for its part in a foreign exchange cartel. It seems to me as if investors just can’t get past the constant string of lawsuits and fines Barclays appears to be facing. And I can’t blame them.
However, these issues are also camouflaging the fact there’s a fundamentally strong business under all of the problems, which is producing fantastic profits. Last year, for example, the bank reported a net income from operations of £2.2bn.
This year, analysts have pencilled in a net profit of £3.8bn. So far, there seems to be little reason to doubt the City’s growth projections for the firm.
CEO Jes Staley is targeting a return on tangible equity (a measure of profitability) of more than 9% for 2019, and 10% for 2020. Insiders have described this goal as “sacrosanct” and Staley isn’t taking any prisoners in his quest to meet the target.
Back in April, it was revealed he is planning to cut bonuses as part of a cost-cutting drive to boost returns at the underperforming investment division, a drastic decision that has risked staff ire. Nonetheless, it’s clear the bank needs to take these actions if its ever going to pull itself out of the doldrums.
Undervalued
Only time will tell if I’m correct in my assertation that the Barclays share price could double from current, but I reckon the odds are in my favour. Even if earnings stay where they are for the next 10 years, there’s still a good chance the stock could double as, right now, it’s dealing at a historical P/E of just 6.8 and price to book ratio of 0.4.
By comparison, shares in international peer HSBC command a P/E of 11.4 and deal at a book value of one. And as well as earnings growth, the City is expecting Barclays’ dividend to rise a double-digit percentage this year as well.
After cutting the distribution to save money in 2016, management decided to double the payout in 2018, and analysts believe an increase of 15% is on the cards for 2019. If this comes to fruition, the stock will end the year with a dividend yield of 5%.
So, overall, not only is the Barclays share price deeply undervalued compared to its peers, but it also supports a market-beating dividend yield,
If the UK leaves the single market, Customs Union and European Economic Area, it will face significant challenges in terms of negotiating trade agreements superior to those it currently enjoys as a member of those institutions. A potential model for success is Canada, which has forged successful global relationships. Regardless of which model the UK chooses to pursue, it will need to undertake extensive and concerted work at the macroeconomic, political and corporate levels.