Editor’s note: This article was first published in September 2012, after Bankia’s bailout. The 4,448 million euro loss, the share prices, the analysts’ target prices, the planned October capital increase and the short-selling ban refer to that moment. Bankia was absorbed by CaixaBank in 2021, so the entry and timing advice is purely historical.
As things stand, no broker recommends this stock. Technical analysis shows it in a downtrend over every time frame, and the fundamentals are not much more encouraging, especially considering that Bankia has posted one of the worst results in banking history (a loss of 4,448 million).
Even so, some people are tempted to buy into the stock because of its big rebounds, when it can gain 20% in a single morning. Clearly, anyone who bought it around 0.50 € has made 150% in just a few weeks. Other readers ask us whether it would be a good long-term investment, since it resembles some of the investments big billionaires make: picking up a beaten-down stock that has government backing.
Well, nobody knows what will happen to Bankia in the long run. We might find it trading at 5 € a share in the future, or the bank might one day be wound up for being considered unviable.
Analysts often joke that Bankia’s support level is zero, and the truth is that most agencies give it a target price below 0.50 €. In fact, the latest target prices it has been given are 0.20 € and 0.30 €.
When to buy into Bankia?
In principle Bankia is not an investment option because of the high risk involved (although it’s a treat for traders, given its volatility), but it is a stock where you would need to watch for a series of events.
First, it’s not advisable to buy before the capital increase it has planned for October, because putting more shares on the market will push the price down.
Second, I would never buy Bankia above 1 €, because just as we see strong rebounds upwards, one day we may also see 30% losses.
The first area where you could give it a try would be back around 0.50 €, with a very tight stop-loss, because if that support breaks, the stock will probably continue on its way to 0.30 € or 0.20 €.
Another factor to bear in mind is that short (bearish) positions are currently banned, but if the ban were lifted, Bankia would undoubtedly be the stock chosen to bring down.
In short, you could try holding Bankia in your portfolio for the long term, but only in the 0.20–0.30 € per share range, not before October and not before the ban on short positions is lifted. In the meantime, I’m sure you’ll find other stocks with less risk and much more upside.
Featured image: Benjamín Núñez González, CC BY-SA 4.0, via Wikimedia Commons.
