Amid a few highly volatile days on the local stock market, the big banks have been clawing back some lost share price — but is it too late to get on board?
Over the past six weeks the banks, along with the rest of S&P/ASX 200 (ASX: XJO) (Index: ^AXJO), has taken a beating, for no reason other than being overpriced. Therefore, some of our best known companies are trading closer to fair value, which provides the perfect opportunity for many savvy investors to buy some great long term stocks.
For example, ANZ’s (ASX: ANZ) share price has been bouncing back from four-month lows in tremendous fashion. Since Thursday, the stock has risen 7.96%.
However, the gains are not surprising considering when the market passes beyond a correction, it usually rebounds to prove once again why investing in stocks is one of the best decisions you’ll make. However, compared to the others, like the Commonwealth Bank (ASX: CBA), ANZ has rebounded further. Perhaps investors are chasing more growth than can be expected from its counterparts.
After the recent correction, no doubt many shareholders will be questioning the big banks ability to provide growth in the short to medium term. One exception to this could be ANZ.
Its efficiency in local markets has given it a leg up for its international expansion strategy, known as the ‘Super Regional Strategy’ which was launched by current CEO Mike Smith in 2007. Over its lifetime, the strategy has been drawing more revenue than its producing. However, this year it is anticipated that ANZ will post its first profit from the division.
When choosing between the big four, Commonwealth Bank is where most investors put their money for safety, whereas those looking for moderate growth choose ANZ. However, at current prices, investors choosing to have less volatility have kept the CBA’s price to earnings higher, currently around 14. Recently the market has shown, the biggest threat to shareholders in banking stocks, is overpricing. Buying any bank stock at a P/E of 14 or above is too expensive.
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- ANZ cleared of rate fixing
- Westpac the key to last week’s gains
- This stock is getting cheaper… and boasts a 7.8% dividend yield!
Motley Fool contributor Owen Raszkiewicz owns shares in ANZ.