LONDON -- One of Warren Buffett's famous investing sayings is "be fearful when others are greedy and greedy only when others are fearful" --or, in other words, sell when others are buying, and buy when they're selling.
But we might expect Foolish investors to know that, and looking at what Fools have been buying recently might well provide us with some ideas for good investments.
So, in this series of articles, we're going to look at what customers of The Motley Fool ShareDealing Service have been buying in the past week or so, and what might have made them decide to do so.
More value to come
At No. 3 in the latest 'Top 10 Buys'* is Lloyds Banking Group (LSE:LLOY) (NYSE:LYG). A couple of weeks ago, it was at No. 8 on the "Sells" list, having reached an 18-month high, but a 10% decline in price proved to be enough of an opportunity for some people to buy, presumably in the hope that the drop was just a blip in the bank's stellar recovery. (Its share price rose over 80% during 2012, the most of any company in the FTSE 100.)
Lloyds certainly seems reasonably well-placed to continue its upward trend. Its share price is still some way off its book value -- it currently stands at a discount of about 20% -- which, so long as there are no serious problems still lurking in the company, means there's more value to be realised.
Of course, Lloyds did have some serious problem -- along with most other banks, of course. But the worst of its mis-selling liabilities, such as those for Payment Protection Insurance and interest rate hedging products, may now have been accounted for (albeit Lloyds set aside a further £1.5bn only two weeks ago). Its bad loans provisioning has been hugely reduced, and it has dramatically reduced its losses.
In terms of its banking operations, Lloyds has restructured its finances to provide far more "core tier one capital" (the highest quality bank capital), and a healthier loan-to-deposit ratio, so it's now in a better position to do one of the things a bank should be doing -- lending money when good opportunities to do so present themselves. In turn, that will help drive the bank's future profitability, which should thereby increase its value.
The idea that the big banks are an essentially risk-free investment has, of course, been completely exploded in recent years, and even if they're still "too big to fail," their share price could still nosedive in the wrong circumstances. But they've been learning their lessons, and Lloyds seems to have been a diligent pupil. So, while the spectre of the government selling off its 39% stake in the bank still looms -- depending on how well, or badly, it's managed, it could significantly affect the share price -- some people clearly have some confidence in Lloyds' continued long-term recovery.
A high-quality growth share
Perhaps Lloyds doesn't appeal, but you're still looking for a high-quality growth share? If so, you'll definitely want to get hold of "The Motley Fool's Top Growth Share For 2013" -- it's the latest report by the Fool's expert analysts, and has only just been released.
It's completely free of charge but, like all special reports from TMF, it will only be available for a limited period, so get your copy delivered to your inbox now!