If I’d invested £1,000 in Barclays shares in 2020, here’s how much I’d have now

Bank stocks have fallen this week, as uncertainty in banks has prompted investors to seek safety elsewhere. In England, one of the most difficult banks Barclays (LSE: BARC).

However, the banking sector is no stranger to crises, and investors who brave the pandemic will see good returns for Barclays shares. So is it time to be brave again?

Pandemic buy

April 2020 is when fears about the Covid-19 pandemic dissipate. As a result, stock prices fell sharply and bank stocks were hit by a combination of low interest rates and the possibility of default.

Barclays Limited shares closed at 80.24 Euros. This means that an investment of £1,000 at that time would buy 1,246 shares.

At current prices, that would have a market value of £1,758. On its own, it has produced more than the past three years, but there are also dividends to consider.

Since April 2020, Barclays has paid out 14.25p per share in dividends to shareholders. With 1,426 shares, I have received an additional £203.

That means my total return over the last three years if I invested £1,000 in Barclays shares would be close to £2,000. Be greedy when others fear they will profit.

Banking crisis 2023

So is it time to get greedy again? There’s a lot to like about Barclays shares today, with the price down more than 10% over the past week.

The stock trades at a price-to-earnings (P/E) ratio of around five, which makes the stock look cheap. There is also a dividend yield of over 5% for investors looking for passive income.

In other words, the stock looks like it could be worth a big if – and it could be a big ‘if’ – the underlying business will emerge from the current banking situation unscathed. I think that might do this.

The problem in the banking sector stems from the liquidity problem. Cash shortages have left some US banks unable to meet depositors’ withdrawal requests.

The government has stepped in to save the customers. But that doesn’t bode well for the banks — or their shareholders.

The question then, is whether Barclays is likely to face the same problem. If yes, it’s better not to go far, but if not, the stock looks undervalued.

Stocks to buy

In view, there are important differences between Barclays and the banks that have failed in the US. The main reason for this is that I think our customers cannot afford a liquidity crisis.

The size of the bank means that customers are likely to receive government support during a crisis. While this does not directly help shareholders, remove the incentive for bank depositors to withdraw funds in a hurry.

If the customer is sure that the money is still there in the future, then there is no reason to rush to cancel. That is why I think Barclays is unlikely to be caught in the coming crisis.

All of this means that I think Barclays shares look like a great investment at the moment. I am looking at making investments in the near future for my own portfolio.