I sold my stake in Barclays plc today outright for cash. This was a tough one, but since I also own Royal Bank of Scotland and Deutsche Bank, I wfelt I had enough exposure to global investment/commercial banks in the midst of what is an uncertain situation, with considerable embedded leverage in the investment banks.
I have a rule that when I can’t decide on a course of action, I do an average of what the various options would be. I’m not selling all of my exposure. I’m not hanging onto it all. So, I’m selling part, and Barclays has had the worst recent PR with respect to its conduit and borrowing activities.
Are these names cheap? Yes, and could get cheaper. If the unwind of leverage in the financial sector worsens, all investment banks will get hit. If not, they are cheap. So, I leave some on, and will look for other opportunities later.
Full Disclosure: Long RBSPF DB
Tickers mentioned: RBSPF DB BCS
Thank you for selling, our investment group is on a 6-8 month BCS stock purchasing program. We like the stock, and we love the low prices we’ve been able to get it for!
I find the comment of “cheap” for these big banks interesting. I think the main question is whether there is a credit cycle or not. If there is, then “cheap” based on peak credit cycle earnings is no different than “cheap” homebuilding stocks in 2005 based on peak earnings.
With all of the off balance sheet leverage and the very small relative capital base, it seems to me that there is not much margin for error.
So … a while ago, you said that you were “scared”. When a reasonable, intelligent guy like yourself says that … I sit up and take notice.
My question is … do you feel that the markets are beginning to adjust as they should …. or do you feel that things are getting out of hand ?
So which firm is most at risk for failure, HBOS or Barclays? Something is amiss when they go to the window so often.