Investment Strategy – A Barclays Bank Analysis
It seems like quite a few members are invested within the financial/banking sector and after a few messenger exchanges, it seems like the general consensus is because it is a safe industry. Lets face it, Barclays Bank aren’t exactly going anywhere, they are too big to fail because if push comes to shove, the government would most probably bail them out.
Based on that, then yes, it would be a pretty robust stock to hold and it seems like quite a few of you have this (or other banks, Lloyds seems to be another popular one)
Of course, I can’t tell you whether you should or shouldn’t have this stock as ones stocks are personal choice and you have your reasons for holding this. I can only base this on what I would do, and within this write-up, I will try to answer 2 questions.
1, Would I purchase the Barclays Bank stock?
2, If I had Barclays in my portfolio, what would my next move be?
To answer the first question, I would have to say, “no”… That was quick and easy enough.
….”Gio, a one-word answer from you, that’s got to be a first!”
Ok, not my style, NOT to give my reasoning so I will explain why.
Firstly, it doesn’t sit well with me that Barclays share price is sitting below its 1996 share price. 24 years later and their shares are worth less now than then! Yes, they have longevity but as an investor, this isn’t the path I should be looking to buying into.
We can see the huge dip taken around 2009 and the banking sector hasn’t really recovered. It has basically been in consolidation for at least a decade.
March 2020 saw the obligatory Covid19 dip and it looks like it is still struggling to get back to its Jan 2020 prices.
At this stage, if anyone is still wondering whether they should be investing in and adding Barclays Bank to their portfolio, let me ask you.. Having this current information to hand, what would you do?
Second question was – If I currently had this stock within my portfolio, what would be my next move?
This would depend on where I bought into this. Let’s say I bought this on Jan 2006 at 539.91 and held until today (23/09/2020) at 95.19, then I would have seen a -82% drop in the share price, unless all the other banks fail and Barclays manages to take over the world, I don’t see a recovery of my funds from this situation.
If I had bought into this in Jan 2018 at 197 and held until today (23/09/2020) at 95.19, that is a -51.68% drop.
…Ok, I know I haven’t really answered the second question yet, I was just giving you guys some information on the scenario at hand before answering. I don’t like answering a question without first explaining what is going on as it serves little to no purpose in helping others understand my logic behind it.
Before I answer this, bear in mind that there is also another option that it seems quite a lot of people use and that is to double down on the stock. Basically, to buy more at the cheaper value so as to balance out the price.
Looking at the chart of Barclays bank, do you think that this is a good idea and would it serve you well?
This isn’t something that I like to do and if I had this stock, my focus would be on an exit strategy.
…”Do you mean just sell the lot, take the hit and move on?”
This depends on one’s mindset as if one had £10K in Barclays, watched it over time deplete to £5K, then of course it would hurt, pulling out the £5K and then trying to bolster that back up.
Remember, it is a 50% drop from £10K to £5K, but it is a 100% rise from £5K to £10K, so converting it back up to its original amount is a bigger ask.
So here are my thoughts and reasoning on an exit strategy.
1, My £10K is now worth £5K and judging by the charts, this isn’t going to go anywhere near back to its original price.
2, Barclays share is in a period of consolidation and it looks like best case scenario, it stays there as this bugger looks like it just likes to keep dropping.
3, If it stays in consolidation for a 2 or 3 years, then my money is tied up and doing nothing whatsoever, other than to torment me every time I log into my shares account and see the figure.
**Note** – Number 3 is very dangerous for any investor as it can cause one to feel low and then we can make silly/rash decisions as emotions start coming into play… EMOTIONS ARE A “NO NO” WHEN IT COMES TO TRADING!!
4, I have looked around and there are stocks that are trending a lot better than Barclays, so buying into these shares would mean that I am on the path to recovering some or all of my funds.
Ok, so let’s see if it is possible to feel better about this decision and if there is any light at the end of this tunnel!
Looking around, I have decided to pull my £5000 out of Barclays and go with Ocado… (ok, I will admit, for the purpose of this write up, I have purposely kept this simple and just chosen one share.. I would not usually do this and would split my £5K across a few sectors)
…”Ok, Gio, looking at the Ocado chart, it is obvious that you have CHERRY PICKED Ocado so as to purposely make you look better”
Actually, no. Believe it or not, Ocado is actually in my portfolio and one I chose due to the charts. I will admit that I didn’t step in on Jan 2018, but I did step in and it is trending well. Granted, it may dip and start on a downward spiral, but that is where a little homework and calculated stop losses come into effect.
Another reason I mentioned Ocado is to show you that, yes, by choosing GOOD TRENDING STOCKS, YOU CAN RECOUP YOUR MONIES! How ace is that!
Bearing in mind that we are looking from Jan 2018 until now, let’s weigh up a few other companies….
If we look at PayPal from Jan 2018 until now, we would see that this stock has given a 119% rise.
If we look at NVIDIA, we will see a 102% rise since Jan 2018
If we look at AstraZeneca, we would see 81% rise since Jan 2018
**I haven’t listed PayPal, NVIDIA or AstraZeneca charts. You can find that info easily enough if you wish**
…. “Again, Gio, you are just cherry-picking certain stocks, which is easy to do when looking back!”
Ok, let me explain something about me here!
I am a Trend Trader and what this means is that I follow (you guessed it) Trends.
This basically means…
1, I don’t believe in holding onto a stock that is going sideways (consolidation) in the hope that it will rise in 1 or 2, or 3 years’ time.
2, I do believe in stop losses so that even though some stocks will dip and stop me out, costing me a little money, my strategy should quickly recover that loss and see me in profit.
3, “Noise” is not part of my Trending Analysis – This means when others recommend a stock based on news, future news or any future possibility, then as this isn’t solid data but just hearsay (even if it is in the Financial Times), it serves little purpose to me.
*I require solid data*
4, CHARTS NEVER LIE – All data presented to me on charts is what has happened and what is currently happening, and my decisions are made based on that.
….. “But surely, charts are lagging data indicators and can’t predict the future!”
Yes, that is true, charts can’t predict the future, but knowing how to analyse the data actually can give one an idea as to what the general consensus is and what people will do. Believe it or not, there are strategies that actually can give you an idea as to when most sell out of a stock and also at what point to buy in.
There is no such thing of a scientific formula that has a 100% success rate when it comes to trading, but what there is, is a strategy that shows how to choose specific stocks, detach all emotions and how to set up an exit point so as to minimise losses.
Back to the “CHERRY PICKING” point…
Some of the stocks listed are stocks that I am in on and chosen on their Trend Analysis. If they started to trend against me, they would be dropped and another would take its place.
So bottom line, no, it isn’t difficult for one to work their way back up to the 100% recoup originally described in this guide, it is just having a strategy and knowing how to implement it.
I hope this helps some people and also gives a little insight to see that no matter what one’s current situation, there is always a way out and to bounce back up
One needs every advantage possible in this game and I am fortunate enough to be a part of a Trend Trading Team that Analyse Stocks and they pick the STRONGEST TRENDING stocks for us all to discuss and see which ones we all feel should be looked at. Yes, of course sometimes one may get it wrong, but as long as one’s success rate outweighs any losses, then you’re doing it right.
Some of us take time out and write guides for free so as to help many others as we are aware that there is too much nonsense being bandied about and unfortunately, that can get people burnt.
Happy to provide any info about them if required, just drop me a message…