Barclays Bank PLC (BCS)

(Top Pick Sep 24/14, Up 1.70%) He likes it because he thought the new management would restructure the business. Another change in management should now push along the restructuring much faster. They have good franchises.

(A Top Pick Aug 14/14. Up 14.95%.) People disliked the stock, but they have some very important franchises. A great retail bank in the UK, good presence in Africa, great credit card business and a reasonable asset management business. They bought Lehmans Investment Bank, and that is the big issue with this company. There are a lot of capital issues that they face, but they are changing that and that is where the upside is.

Not an expensive stock. .7 times book value. Their problem is that it has been too beauracratic, they are moving away from that. Have a great franchise in retail, cars, and Africa. They will continue to do well.

Thinks interest rates will rise in the US 1^st, followed by the UK. If we see interest rates rise within 6-18 months in the US, he thinks the UK will be at least 18 months behind. UK economy is strengthening quite nicely, so continental Europe will be behind that. The big catalyst will be higher interest rates. Also, the government still has an interest in it. At these levels it is fine.

Fixed income takes up a lot of their capital so they are moving to reducing it. They are looking at their core banking franchise and looking at global customers. Great retail franchise and a great card business plus a great wealth management business. This all helps them to do very well. It is under restructuring but if you buy it here it will do well over the next 2-3 years.

Stock has been pushed down because of issues, that they will solve like a lot of the other banks did. Have a great retail franchise in the UK. Had a retail franchise in Europe which was poor, so they are getting out of those. Barclays credit card, although down, is a great asset to have. They have asset management. Also, have the investment bank, which has been their big problem. Had bought Lehman Brothers out of bankruptcy. Also, were very large in the fixed income side, which takes up a lot of capital. They are fixing those problems.

Bought Leman Brothers. They are now a very substantial investment bank. It is a great franchise in the UK and they have a great wealth management business. They are going to be a smaller investment bank so their cost structure will go down. Their Barkley’s card is quite strong.

Trades at about 0.6X Book and will be trading at about 7 or 8 times next year’s earnings. In their last earnings, their personal and commercial business was up a fair bit. They bought Lehman Brothers and took a lot of the fixed income business and put it into what they call a “bad bank” and are slowly disposing of it. They are really going back to their traditional retail business. They’re going to keep the investment bank, but are going to be a much more smaller bank giving a better return on equity.

This is very, very negative. One thing that is nice is that it opened up at one price and closed slightly higher. It is almost impossible to tell where it is going to go.

Some of these banks are a little sloppy because of a Ukraine situation. Feels there are opportunities in the banks because we have basically been going sideways for so long, but you really have to pick and choose. (See Top Picks.)

Lloyds with a big investment bank stapled onto it. Big credit card business. Investment bank is the sore spot. Others have taken a lot of costs out of their businesses. They think better things are ahead for this part of the business. This one is cheaper on a valuation basis than others. Thinks it should do well.

(Market Call Minute.) Banking in the UK is improving. Have new management, which is trying to concentrate on more and steadier businesses like asset management.

Higher interest rates are going to cure their past issues. Probably a higher risk than Lloyd’s (LYG-N) or HSBC (HBC-N). If you’ve held it for a long period of time, your choices are a) double down or b) Sell and move into HSBC if you want financial exposure. However, he feels there will be more upside over a 3-5 year period.

(A Top Pick September 13/12. Up 31.57%.) Still thinks this is very undervalued. Trading at only 7-8 times earnings, well below its global peers. Still room to go.

Hasn’t bought as yet but is looking to purchase on a pull back. Number 4 bank in terms of assets globally. Obviously got hurt by the entire European debt situation. Last week’s action by the ECB has certainly helped the stock. Has broken out above the 200 day moving average. In this kind of a situation, you want to have a stop loss in place.