Is Warren Buffett right about this 1 thing when it comes to Barclays shares?

Throughout his investing career, billionaire investor Warren Buffett’s given out a lot of advice. But perhaps the most insightful nugget of wisdom is to “be fearful when others are greedy and greedy when others are fearful“.

Instead of following the herd, investors can often enjoy an outsized return by intelligently looking for opportunities where no one else is, instead of chasing what’s popular. And that’s what’s brought Barclays (LSE:BARC) onto my radar.

Over the last two years, the leading British banking institution has been on a bit of a rampage. Management’s been successfully capitalising on higher interest rates, elevating its profits, and sending the share price up by almost 210% since the start of 2024!

What was once a sleepy banking business for over a decade has transformed into a high-growth, top-performing FTSE stock. And even in 2026 it continues to rank among the most popular stocks to buy, according to AJ Bell’s data.

But is this an early warning sign of investors getting greedy? And is now the time to become more fearful?

The bull case

Even after its massive rally, Barclays’ shares still have a lot of strengths behind them. The valuation remains relatively reasonable at a price-to-earnings ratio of 12, given that the recent share price gains were driven by higher profits rather than speculative growth expectations.

At the same time, the bank remains on track to deliver Â£2bn in efficiency savings by the end of 2026, with the all-important return on tangible equity (RoTE) standing at 12.3% – already ahead of its upgraded full-year 2026 target of 12%.

Its net interest margins continue to stand strong at 4.55%, thanks to some intelligent hedging against the Bank of England cutting interest rates. And with profits still on the rise, particularly from its investment banking arm, which recently delivered its strongest performance since 2021, it isn’t hard to see why Barclays remains a popular stock in 2026.

What could go wrong?

While it’s hard not to be impressed with Barclays’ performance, some potential cracks have started to appear. With wider economic weakness creeping in across the UK and the US, the level of credit impairments has started to rise alongside default rates.

As things stand, these delinquencies remain firmly within manageable levels. But with unemployment climbing, the level of risk is on the rise.

Even if credit impairments don’t get out of hand, Barclays’ impressive net interest margins may soon start to reverse. With more aggressive interest rate cuts suspected from both the Bank of England and Federal Reserve in 2026, lending margins could soon come under pressure, particularly as existing hedges begin to expire.

Further interest rate cuts do create some more favourable tailwinds for its investment banking business. And it could also drive up mortgage demand as home affordability improves. But that tailwind may fail to materialise given the weakened economic landscape.

The bottom line

Overall, Barclays continues to demonstrate impressive strength as a business. But with numerous headwinds on the horizon, now may be the time to heed Buffett’s advice and become more fearful after such a stellar run. That’s why personally, I’m looking for buying opportunities elsewhere. Luckily, I’m spoilt for choice.

The post Is Warren Buffett right about this 1 thing when it comes to Barclays shares? appeared first on The Motley Fool UK.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays Plc. 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.