The British version of Bank of America Corp. (NYSE: BAC) received its second upgrade for the month of May on the penny stock by the firm that fed the London Whale. Lloyds TSB Group plc (NYSE: LYG)(LSE: LLOY.L) shares were upgraded by Wall Street analysts at JPMorgan Chase from an “underweight” rating to a “neutral” rating on Wednesday. The penny shares of LYG stock closed down -6.13% at $1.53 on volume of 1,803,768. This is the second upgrade, although not as prolific, that the multi-listed Billion dollar penny stock of Lloyds Bank received this month. On May 4th, LYG was upgraded by Wall Street analysts at WestLB to a “buy” rating.
The Question Is: Could the bank across the pond, the largest retail bank in the UK, be undervalued?
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LYG Stock Chart
Market Cap: 26.22B
Price/Sales (ttm): 1.36
Price/Book (mrq): 0.39
Book Value Per Share (mrq): 4.20
52-Week High
(Jul 1, 2011): 3.26
52-Week Low
(Nov 23, 2011): 1.33
50-Day Moving Avg: 1.86
200-Day Moving Avg: 1.88
Avg Vol (3 month): 1,634,220
Avg Vol (10 day): 1,463,710
Shares Outstanding: 17.14B
Float: 10.39B
Lloyds Banking Group plc’s penny stock is currently priced at -18.35% below its 50 day moving average, -18.79% below its 200 day moving average, and -53.07% below the 52 week high of $3.26. From a technical perspective, everything is screaming sell on LYG:
| Composite Indicators | Signal | ||
| TrendSpotter | Sell | ||
| Short Term Indicators | |||
| 7 Day Average Directional Indicator | Sell | ||
| 10 – 8 Day Moving Average Hilo Channel | Sell | ||
| 20 Day Moving Average vs Price | Sell | ||
| 20 – 50 Day MACD Oscillator | Sell | ||
| 20 Day Bollinger Bands | Hold | ||
| Short Term Indicators Average: 80% Sell | |||
| 20-Day Average Volume – 1,439,020 | |||
| Medium Term Indicators | |||
| 40 Day Commodity Channel Index | Sell | ||
| 50 Day Moving Average vs Price | Sell | ||
| 20 – 100 Day MACD Oscillator | Sell | ||
| 50 Day Parabolic Time/Price | Sell | ||
| Medium Term Indicators Average: 100% Sell | |||
| 50-Day Average Volume – 1,537,074 | |||
| Long Term Indicators | |||
| 60 Day Commodity Channel Index | Sell | ||
| 100 Day Moving Average vs Price | Sell | ||
| 50 – 100 Day MACD Oscillator | Sell | ||
| Long Term Indicators Average: 100% Sell | |||
| 100-Day Average Volume – 2,029,016 | |||
| Overall Average: 96% Sell | |||
Liars Can Figure, But Figures Don’t Lie
The typical retail investor would likely follow the flow above and sell LYG stock to cut their losses before throwing themselves into trying to understand every comment the ECB makes while Greece, Spain and Italy all drive down the value of the Euro and its affect on Lloyds Bank. However, the contrarian investor with a long position sees this as a perfect opportunity to buy LYG stock. Why?
For the quarter ended March 31, 2012, Lloyds Banking Group reported:
Total Cash (mrq): 446.78B
Total Cash Per Share (mrq): 26.07
Total Debt (mrq): 400.86B
Hence, Lloyds Bank is liquid and liquidity means opportunity for the retail bank that hosts accounts for over 30 million people. And, how about cheap dividends? Currently, Lloyds Banking Group is prevented from paying dividends on its ordinary shares as a result of the European Commission state aid review. However, dating back just to 2008 when the US housing market collapse and the mortgage fraud derivatives were sold off to the Europeans, LYG was paying its U.S. shares dividends of:
2008: $0.8062,2007: $2.8408, 2006: $2.6744, 2005: $2.4791, 2004: $2.5393, 2003: $2.3916, 2002: $2.1604, 2001: $1.9405
Until that 2008 global economic crash, the Yankee shareholders got almost twice as much in dividends as the penny shares are trading at today. That’s like taking in a buy-one, get-one free coupon to your broker each year if you can hold on to your coupons for awhile patiently.
To find out more about Lloyds Bank and LYG stock, visit: www.lloydsbankinggroup.com
Bottom Line: Lloyds TSB shares, LYG stock, is on the list of penny stocks to watch and sit on for 3-5 years while the EU sorts itself out. Our English speaking neighbors across the pond will survive as they always have done through times of turmoil since they controlled over 60% of the globe just 300+ years ago.
LYG stock is a bargain at this price if you can sit on it. It’s a multi-Billion dollar, multi-listed global company with the largest presence in the strongest currency in the world. Buying LYG shares is like putting money in the bank.
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