HSBC shares: why I think the bank is still a Covid-19 rebound play

first_imgHSBC shares: why I think the bank is still a Covid-19 rebound play 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. “This Stock Could Be Like Buying Amazon in 1997” Jay Yao | Monday, 30th November, 2020 | More on: HSBA Image source: Getty Images Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings. 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.center_img Our 6 ‘Best Buys Now’ Shares Among the rallies in stocks due to positive vaccine news, the rise in HSBC (LSE: HSBA) shares has been among those making the biggest impact. HSBC shares are fairly widely held, so many investors have benefited from the rally. And after the surge, these investors could be feeling a little better about their portfolios. Thanks to a 27% rally over the last month (with much of it due to the vaccine candidate data), shares of HSBC are around 50% higher than their September lows.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…But despite them no longer being as great a bargain as they were in late September, I still believe HSBC shares remain a Covid-19 rebound play. And I’d still buy and hold the stock at current prices. HSBC shares: I like the valuationOne reason I like HSBC shares still is that the bank’s price-to-book value (P/B) ratio remains fairly low versus where it was before the pandemic. At the time of writing HSBC’s have a P/B of  around 0.57, versus the P/B of around 0.877 at the end of last year. I don’t think it will stay this low for long. I feel it could rise because the bank’s normalised earnings will likely grow as the world economy returns to business as usual. I also reckon those normalised earnings could grow as management proceeds with its cost restructuring plans. If earnings grow in the way I expect in the coming years,  the market could have more confidence in the assets that the bank uses to generate its earnings. If the market has more confidence, investors could award the bank a higher P/B. Second, I feel HSBC’s P/B could rise given that the US election is now over and with the new potential for US China relations to improve. If relations between the two countries do improve, the market could potentially price less risk into HSBC shares. Greater China is a hugely important market for and it makes most of its profits in that region. Dividend resumption?I also see HSBC as a Covid-19 recovery play due to what management might do with the dividend over the next few years. The company could pay a dividend again next year as regulators become less concerned about Covid-19. In fact, there is even potential for the bank to pay a limited dividend this year based on management’s third-quarter commentary. That probably will not be anywhere close to the pre-pandemic dividend, but the payout could have the potential to rebound close to pre-pandemic levels over the next few years as its earnings normalise. That would boost the share price too in my view.Given the bank’s valuation and what I think management might do with the dividend over the next few years, I’d buy HSBC shares at these prices and hold for the long term.  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. Enter Your Email Address Simply click below to discover how you can take advantage of this. See all posts by Jay Yaolast_img read more