Shares in Commonwealth Bank of Australia (ASX: CBA) have delivered enormous returns for shareholders, having climbed 14.8% in the last 12 months and 66.1% since the beginning of 2012 (not including dividends). Indeed, they have been one of the primary drivers of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) in recent years which is now sitting above 5,500 points once again.
However, since hitting an all-time high of $82.685 a little over a month ago, the shares seem to have lost their upwards momentum. Instead, they have slowly trended downwards and recently sank below $80 for the first time since late May.
The question on many Aussie investors’ minds now is whether or not the shares can regain that momentum, or if it is now time to move on to other high-yielding blue-chip stocks?
Will CBA climb higher?
Commonwealth Bank has been popular in recent years thanks to the strong economic tailwinds (for instance, low interest rates), its defensive nature and its juicy, fully franked dividend yield. In fact, at one stage it was yielding roughly 7%!
Unfortunately, the stock’s rapid rise has seen that yield drop much lower, although it still remains far more appealing than the alternative returns from term deposits or government bonds. As such, it is certainly possible we could see the shares regain their momentum and exceed their record high in the coming weeks or months.
Are the shares a buy today?
Although short-term gains are possibly on the cards for investors, the stock does not present as a strong long-term prospect. The same goes for its rivals Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ).
Despite being one of Australia’s strongest corporations, Commonwealth Bank’s shares currently appear to be ‘priced for perfection’ and offer little upside for long-term focused investors. For instance, they are trading on a historically high P/E ratio and Price-Book ratio, while earnings could well come under pressure in the near future when interest rates inevitably rise.
By no means am I disregarding the quality of Commonwealth Bank, or the returns it has managed to deliver patient investors. I am not even going as far to say I believe the stock is a ‘Sell’. But I certainly wouldn’t be buying the shares at these prices.