IN FOCUS: BARCLAYS ‘ ITS PRICE COULD SOAR AND IT WOULD STILL BE DIRT CHEAP’
Barclays has a lot of cash and is increasing its dividend, while there are indications that it will start buying back its own shares quite soon.
It has taken some time to clean up the mess of previous management, which was mired in scandal, and over the past decade earnings have been diluted by fines. We now have a new top brass in place and legacy problems are disappearing with fines being settled, meaning future earnings won’t be hampered.
There are two principal businesses: the retail bank and the investment bank, plus Barclaycard. Some people avoid the stock because of the risks involved with the investment bank, but it is now turning itself around and we are seeing good results.
The bank has also attracted the interest of activist investors. While we may not always agree with what they say, having an activist helping to steer the business along is no bad thing. If we get some certainty on Brexit this stock could go up by 10pc, 20pc or 30pc – and even after that I would be saying it’s cheap.
We have held it for three years and have been building up our position, adding quite aggressively in the recent sell-off. because we don’t think they can attract a new, younger customer base, for example. CDs, books and DVD shops are being crucified by the likes of Amazon.
But we do like companies such as DFS, which has a large market share of the sofa and furniture sector. When you buy a sofa you still want to go into the shop: your partner wants to see it and sit on it, and you can’t do that online.
What have been your best and worst investments?
DS Smith, the packaging company, has been our highest contributor. It has great management and provides all the Amazon boxes in the country.
Countrywide, the estate agent, is a stock we sold out of. It couldn’t overcome its demons, had poor management and bookkeeping and was unable to compete alongside online disruptors.
How are you paid?
A basic salary, a share of a management fee and a performance fee when we outperform.