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Investors want to take shares Lloyds Banking Group (LSA: LOY) have no shortage of opportunities at low prices. Lloyd’s shares have dipped in the penny-share range for years. Even before the outbreak, we were looking at just 60p or less.
Today, at around the 45p mark, is Lloyds too cheap to ignore? Well, if there’s anything better than a short-term buying opportunity, it’s got to be a long-term buying opportunity, right?
If I don’t have some Lloyd’s shares, can I buy them now? Or, more importantly, will I buy more?
When considering buying Lloyd’s stock, as with anything else, I think investors should ignore one key consideration and focus on what’s important. That’s ignoring short-term conditions and focusing on the long-term.
10 years
As billionaire investor Warren Buffett famously advises: “If you don’t think about owning a stock for 10 years, don’t even think about owning it for 10 minutesHe said.
This is good for me as I always invest for the long term. It means that I hold onto my Lloyds shares with the intention of keeping them for at least another decade. And if I buy more, I want to keep it for at least that long.
Oh, and even though my stocks have been falling in value while I’ve been earning them, my annual dividends are coming. And that’s why I buy stocks.
Lloyds returned with a 4.2% yield during the pandemic. For 2022, analysts are forecasting a 5.5 percent yield. Moreover, they showed a rise of 6.5% in the next two years.
Recession?
Anything can happen in the next two years. And any downturn could keep bank stocks under pressure. For example, at the end of 2022, I think there is a good chance that Lloyd’s shares will continue to rise.
My long-term optimism is actually based on one main idea. I fully expect the UK economy to recover and return to growth. It’s happened every time we’ve had a recession so far, and we’ve been through some corkers.
This means that banks will have good results in the long run. Banking is the most important piece of infrastructure that every sector of the economy needs.
Can banks lose?
For me, the financial sector is the ultimate ‘pick and shovel’ investment. These were named after the gold rush. No rich man returned empty-handed, those who provided tools and materials got their money.
I can’t imagine a strong long-term economic future if banks don’t make healthy profits and pay dividends to shareholders. This does not mean that banks fail. We saw some spectacular failures during the financial crisis.
There’s a lot of short-term risk, to be sure. Especially since Lloyd’s is big on mortgages and the housing market is likely to slow down. But I am seeing the past very well.
Lloyds remains firmly on my ‘buy more’ list, especially at today’s penny share price.