Sunday, December 02, 2007
A great week, to be followed by a better one?
Bank shares rose strongly last week in the aftermath of Barclays' trading update. Barclays announced that despite the difficulties in the credit market the company was still on track to produce earnings 'broadly in line' with market expectations of 68.8p per share.
This is fantastic news. It not only confirms that Barclays will make a substantial profit this year and no doubt pay a chunky dividend to boot, it also demonstrates the inherent resilience of Barclay's business model. At a time when banks are announcing huge write-downs on mortgage portfolios around the world, Barclays is able to ride out these extreme shocks and is delivering another year of growth to investors. I purchased the shares at 577p and again at 549p. At today's 567p the shares are trading on a P/E of less than ten. This doesn't seem right for a company that can deliver growth even in times of great difficulties in the financial markets. After initially investing in the belief a P/E of 13 would be fair for this company, I am now wondering if the valuation should be more like 15, putting the shares at over ten pounds each.
Elsewhere in my portfolio I am expecting trading updates from Royal Bank of Scotland and RC Group. At current prices, any announcement other than a profit warning could see substantial uplift in the prices of each of these investments.
Roll on Monday and the rest of the week.
The Artful Dodger
This is fantastic news. It not only confirms that Barclays will make a substantial profit this year and no doubt pay a chunky dividend to boot, it also demonstrates the inherent resilience of Barclay's business model. At a time when banks are announcing huge write-downs on mortgage portfolios around the world, Barclays is able to ride out these extreme shocks and is delivering another year of growth to investors. I purchased the shares at 577p and again at 549p. At today's 567p the shares are trading on a P/E of less than ten. This doesn't seem right for a company that can deliver growth even in times of great difficulties in the financial markets. After initially investing in the belief a P/E of 13 would be fair for this company, I am now wondering if the valuation should be more like 15, putting the shares at over ten pounds each.
Elsewhere in my portfolio I am expecting trading updates from Royal Bank of Scotland and RC Group. At current prices, any announcement other than a profit warning could see substantial uplift in the prices of each of these investments.
Roll on Monday and the rest of the week.
The Artful Dodger
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