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My Lloyds (LSE: LLOY) shares have been winners. I only bought them a couple of years ago, and so far I’ve almost doubled my money, from share price growth and reinvested dividends. Not bad going for a stock from the supposedly staid UK financial services sector.
The FTSE 100 bank is up 36% in the last 12 months, and I think it still looks decent value, trading at a price-to-earnings ratio of just under 12. The price-to-book ratio of one suggests it’s fairly valued, although not exactly cheap.
While the yield has dipped slightly as the share price climbed, it still stands at a healthy 4.2%. That’s nicely covered twice by earnings, too.
Balancing the risks
There are challenges. This is a domestic-facing bank in a sluggish domestic economy. Higher interest rates have helped boost net interest margins, but could weigh on the housing market and squeeze demand for mortgages.
On 1 May, Lloyds hiked its bad debt provision from £57m to £309m. This included £100m to reflect US tariff risks. At the same time, profits dipped 7% to £1.53bn as costs rose. However, net income climbed 4% to £4.4bn and full-year guidance was reaffirmed.
Analyst forecasts produce a one-year share price target of 83.6p, up 9.5% up from today’s 76.3p. Add in a forecast dividend yield of 4.6% for 2025, and it looks better. I’d consider buying more. Problem is, I don’t have the cash. So should I sell my biggest FTSE 100 loser?
From bad to worse
I’m talking about Glencore (LSE: GLEN). I bought a couple of years ago, and I’m down around 35%. There’s been a bit of income, and some share buybacks, but nowhere near enough to soothe my pain.
The miner’s share price is down 37% over the last year. Its Q1 update on 30 April didn’t offer much relief. Copper output fell 30%, nickel slumped 21%. There were gains in cobalt, zinc, and coal, but they didn’t move the dial.
Broker Berenberg downgraded its 2025 earnings forecasts by 19%, citing poor production and a weak marketing division. It also cut its target price from 400p to 380p, warning that Glencore had started 2025 “on a soft note”. Yet the broker still rates the stock a Buy, and it’s not alone.
Of 19 analysts offering ratings, 15 call it a Strong Buy and another two say Buy. I’m blown away by their optimism. I expected apathy, which is my attitude. Mining is a cyclical sector, though, and cycles tend to turn.
Sitting tight for now
So, I’m torn. Lloyds has had a good run, Glencore a bad one. I don’t want to fall into the trap of ditching the loser just before it recovers and buying the winner just before it stalls. When commodity stocks recover, they can grow quickly. With the global economy struggling I can’t see the trigger, but others do.
If I held neither and was starting fresh, I’d consider buying Lloyds. But I’m not in that position. So I’ll hang on, grit my teeth, and hope those brokers are right. Shame, though. I’d love to buy more Lloyds shares. Maybe I can sell something else.
