Shares in Commonwealth Bank of Australia (ASX: CBA) appear to have lost their momentum in recent weeks. Since hitting an all-time high of $82.685 early in June, the stock has steadily fallen in price and recently closed below $80 for the first time in over six weeks.
While it has recovered marginally since that time, investors must now be wondering whether or not there is still money to be made from this market behemoth, or if it's now time to ponder other alternatives.
How are the shares trending?
Given the time of year (having just ended financial year 2014), the stock's pullback could be attributed, at least in part, to investors taking their profits. After all, the stock has managed to climb almost 20% in the last 12 months, heavily outpacing various other blue-chip stocks as well as the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) itself.
It is also worth mentioning that the bank's forecast 4.8% fully franked dividend yield is likely going to continue acting as a magnet for investors given that interest rates don't look like increasing anytime in the near future.
As such, I believe the stock could well climb a little higher in the short-term. One analyst firm has even tipped the stock to climb as high as $87.80 over the coming 12 months – that would be a 7.8% upside from today's price!
Is there long-term value in the stock?
While profits could certainly be made in the coming weeks or even months, the medium and long terms are looking much bleaker. For a long time, I have thought that Commonwealth Bank, Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ) have all been heavily overpriced. Each are currently trading on excessive P/E ratios (far higher than their 10-year averages) and steep Price-Book ratios.
While interest rates will inevitably rise, so will bad debt charges which could put significant pressure on CBA's earnings. If it cannot live up to investors' high expectations, the share price will almost certainly drop. Couple that with the heated up competition in the mortgage market and I believe there is very little value left to be realised by investors.
Here's what the SMART money is doing instead…
While much of the market's attention remains on the banks' (diminishing) dividend yields, the smart investors are putting their money behind other high yielding stocks that remain far more attractively priced!
