Lloyds’ share price rose 19% last week. Is it time to buy?

first_img G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. “This Stock Could Be Like Buying Amazon in 1997” See all posts by G A Chester Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! The Lloyds (LSE: LLOY) share price showed little inclination to join in the FTSE 100 rally through April and May. However, that changed last week. It soared 19%, flying far ahead of the Footsie’s 6.7% rise.Closing on Friday at 35.55p, and with further gains to 37.5p today (as I write), could the big recovery finally be underway for the much-battered Lloyds share price?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Buy low and sell highFor stocks in highly cyclical sectors, such as banking, I believe a value-investing approach is the way to go. That’s to say, buy low and sell high. As opposed to buy and hold forever. If you look at a multi-decade chart of the Lloyds share price, you’ll see how a long-term, buy-and-hold strategy hasn’t done investors any favours.Furthermore, many get sucked into buying cyclical stocks at the worst possible time. Namely, when profits are booming, price-to-earnings (P/E) ratios are low, and dividend yields are generous. This was the profile of Lloyds in recent years.Some of us at the Motley Fool — admittedly a minority — were bearish on the Black Horse. They cautioned readers that, in the case of cyclical stocks, high profits, low P/Es and big dividends are very much not indicators of an unmissable bargain with a wide margin of safety. It may seem counter-intuitive, but the best — and safest —  time to buy cyclicals is when profits are crushed, P/Es are high, and dividends often slashed or suspended.At such times, you can pick up shares at low prices and, subsequently, sell high in the cyclical recovery.Positive indicators for the Lloyds share priceOne of my fellow Motley Bears on Lloyds, Kevin Godbold, judged last week that the time has come to make the value play on the Black Horse. Noting that “the valuation indicators have lined up,” Kevin pointed to:A massive profit fall forecast for 2020A forward P/E of almost 19 (versus the single-digit P/E of recent years)A price-to-tangible net asset value (P/TNAV) of just below 0.5 (another good indicator of cyclical-bottom value)An encouraging “consolidation on the share price chart”I agree with Kevin that Lloyds’ valuation indicators look far more promising today than they have for the last few years. I don’t do the share-price-chart stuff myself, but I’d add the suspension of Lloyds’ dividend (0% yield) to the list of positive indicators.Am I keen on the Lloyds share price?Alongside the positive indicators, Kevin is encouraged by the situation on the ground. He’s optimistic about Covid-19 fading quickly, the lifting of restrictions on businesses and consumers, and an earnings recovery for many companies in 2021.He may have timed the cyclical value play perfectly. However, I’m less sanguine on the outlook for the V-shaped recovery the market seems to be increasingly pricing. Even if we don’t see a second wave of the virus, I think there’s a high risk things could get a lot worse for the economy, and Lloyds’ business and share price.Lloyds’ last reported TNAV was 57.4p per share. With the shares currently at 37p, the P/TNAV is 0.65. I’d want a much bigger discount than this to encourage me to play the cyclical recovery card.As such, I’m continuing to avoid Lloyds at this stage. But I’d be very interested should we get a P/TNAV down to around 0.35 — meaning a share price of around 20p.center_img Our 6 ‘Best Buys Now’ Shares Simply click below to discover how you can take advantage of this. Image source: Getty Images. Enter Your Email Address Lloyds’ share price rose 19% last week. Is it time to buy? G A Chester | Monday, 8th June, 2020 | More on: LLOY last_img

Leave a Reply

Your email address will not be published. Required fields are marked *