The economy has hurt the banks, and Barclays (LSE: BARC) shares are down 25% since their 52-week high in February.
The five-year picture isn’t much better, with a 21% loss. So perhaps not a good stock to buy during the 2020 stock market crash?
Think again
Well, actually, anyone who bought at the bottom would have doubled their money by today. Oh, and they’d have some dividend cash on top.
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So, £10k plonked down on Barclays shares on the key day in March 2020 could have swollen to around £20k now. Just the right amount to fill up a new Stocks and Shares ISA, in fact.
What does this tell us?
Well, I’m not going to tell people that the secret to stock market success is to make sure we buy shares at their rock bottom prices.
Value, not time
We really can’t do that with any reliability. I’ve managed to buy near the bottom just a handful of times in my investing career, purely by luck.
No, what I take here is that there’s a key thing to do in a stock market crash, and it’s really pretty simple. Just buy shares.
Now, I won’t go as far as to say it doesn’t matter which shares we buy, and we should just buy any.
But, this far on, seeing one of our struggling sectors on such big gains does suggest it’s a lot less critical to pick the right shares to buy in a crash, doesn’t it?
Fund or trust
If we had a new stock market crash in the next few months, and I didn’t know what to buy when prices were down again, I’ll tell you what I’d do.
I’d put my money in an index tracker fund, or a diversified investment trust, and be happy to take whatever market recovery we might see when things get better.
I mean, the FTSE 100 as a whole hasn’t beaten Barclays since the crash. But it’s still up 50% since a 2020 low of 4,899 points.
And that’s a pretty good return in just three-and-a-half years.
Back to Barclays
But to get back to Barclays shares, perhaps there’s a better stock market crash strategy here.
Maybe just buy the sectors that are hit the hardest, with some diversification for safety?
I’d be wary of individual stocks that fall the furthest, as there were some that were genuinely in a bad state. I’d keep clear of companies with big debts, for example, and with real risks of going bust.
But FTSE 100 financial stocks? I rate the UK banks as safe for the long term, especially with today’s strong liquidity rules.
Buy now?
Are Barclays shares still good value now?
Well, we’re looking at a forecast dividend yield of 5.3%. And the stock is on a price-to-earnings (P/E) ratio of under five.
To me that’s a steal, at least for investors looking to buy and hold for 10 years or more.
There’s definitely some short-term risk, though. Hmm, maybe we will get a new crash and I could buy Barclays shares even cheaper.
