Barclays Shares Break 300 Pence Barrier

LONDON -- This morning, shares in Barclays  (LSE: BARC  )   (NYSE: BCS  )  passed the 300 pence mark. If they can end the session at this level, it will be their highest price since April 2011.

In the last six months, Barclays shares have benefited from three developments. First, political progress in the eurozone has calmed previously panicky investors. Second, we are now in a bull market. Conditions like these are great for shares -- especially financials like Barclays. The third reason for Barclays' big rise is the effect that the LIBOR scandal had on its share price in 2012.

Barclays and LIBOR: controversy and opportunity
Before Barclays' role in the LIBOR scandal broke in 2012, the shares were trading around 200 pence. As the panic reached a crescendo, the shares fell as low as 150 pence.

The announcement of former CEO Bob Diamond's departure was a great point to buy shares in the company. It showed that Barclays was willing to lose people associated with the wrongdoing and that a new corporate ethos was required.

The fundamentals
Even after recent strong rises, Barclays' stock still looks attractive. In February, the bank will report its earnings for 2012. Expectations are that Barclays will announce earnings per share (EPS) of 35.5 pence and a dividend of 6.5 pence per share. At today's price, that puts the shares on a historic price to earnings (P/E) ratio of 8.5 and a yield of 2.2%.

It gets better.

Barclays is forecast to grow its earnings and dividend substantially in 2013. The forecast yield for 2013 rises to 2.4%, and the expected increase in profits mean that the shares today trade on a 2013 P/E of just 8.

My verdict
Barclays shares are cheap right now. Unfortunately, the whiff of the LIBOR scandal still surrounds the company. This week, lawyers acting for a former customer of Barclays' have been alleging that senior executives at the bank had more knowledge of the wrongdoings than has previously been acknowledged.

Despite that, I would be buying Barclays shares now if I did not already have plenty of exposure to the sector.

Buying shares in Barclays at the height of the LIBOR scandal required substantial nerve and a strong contrarian conviction. Billionaire investor Warren Buffett has frequently talked of the need to go against the herd to make big gains. Buffett has recently been buying shares in one U.K. company. If you want to find out which share Buffett has been buying and the price he paid, get the free Motley Fool report, "The One U.K. Share Warren Buffett Loves." This report is completely free and will be delivered to your inbox immediately. Just click here to start learning from this master investor today.


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