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Why I'm Banking on Barclays

By Sam Robson - Apr 9, 2013 at 1:02PM

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One Fool likes the look of Barclays.

LONDON -- Over the last year, I've slowly been building up a small portfolio that currently consists of an income share, a growth story, and a contrarian play, across different industries that include insurance, alcohol, and telecommunications.

My best performing share has arguably been Vodafone, which has yielded healthy dividends, and I've seen the share price recover over time following a dip soon after I bought in -- further evidence that the Foolish philosophy of buying shares that you're only prepared to hold for three to five years at least -- and resisting short-term market turbulence -- pays off! From a growth perspective, however, Diageo is the front-runner in my portfolio, having seen a 7.2% increase since I bought them in mid-January.

As we enter into April and a new British tax year, though, I have been looking for new shares to invest in -- and, in the interest of further diversification, I've been looking at the banking sector. Specifically, the one that's caught my eye is Barclays (BARC 1.61%) (BCS 1.39%)

Now, I know that banks and their top brass have taken a battering in recent times, but I took an interest in Barclays when new CEO Anthony Jenkins revealed the bank would be shoring up its U.K. operations and providing more transparency for its shareholders -- for example, Barclays will be reviewing 75 of its business units to determine which can provide a decent return without further threatening the company's reputation.

Yielding around 2.3%, it also pays a dividend -- unlike its high-street banking rivals Lloyds and RBS -- while Jenkins has also declared his intention to eventually pay shareholders 30% of earnings, and a return on equity above 11.5% (currently 7.8%, up from 6.6% last year).

The recent turbulence in the eurozone caused by Cyprus rippled through the FTSE, causing the U.K.'s premier index to dip and many of its constituents -- especially banks -- to fall back with it. However, I believe that a continued economic recovery will see Barclays share price motor, and led by a strong management team with Jenkins at the helm and the new wave of shareholder transparency that has been promised, I believe that its current price of 285 pence represents a buying opportunity, and I have added the bank's shares to my portfolio.

If you're looking for companies outside of the banking sector that have strong potential to soar in price, then we've pinpointed our favorite growth share from elsewhere in the FTSE 100. The Motley Fool's top analysts have produced a free report in which they evaluate its finances and risks, and its growth prospects going forward. Simply click here to get your copy delivered to your inbox immediately -- it's completely free.

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Stocks Mentioned

Barclays PLC Stock Quote
Barclays PLC
$8.74 (1.39%) $0.12
Barclays PLC Stock Quote
Barclays PLC
$170.38 (1.61%) $2.70

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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