Commonwealth Bank of Australia (ASX: CBA) has been one of Australia's worst performing blue-chip stocks in recent months and has acted as a significant drag on the overall S&P/ASX 200 (INDEXASX: XJO). Having reached as high as $83.92 back in July, the stock is now trading hands for just $76.10.
The question on most investors' minds is whether now is the time to buy? Having now upgraded the stock from 'Hold' to 'Buy', brokerage firm Bell Potter certainly seems to think so, but I still have my reservations.
To begin with, I am still very wary of the bank's valuation. Trading on a P/E ratio of 14.4x, it still seems expensive considering the bank's limited growth opportunities over the coming years.
You also need to consider the risks facing the sector and establish whether it's really worth the price you're paying for (what I perceive to be) perhaps little upside potential. For instance, a falling Aussie dollar could spark even further selling pressure from foreign investors, while cracks in Australia's inflated housing market could appear which could heavily impact the bank.
Buy, Hold or Sell?
While gains could certainly be made from fluctuations in the near-term, I believe long-term investors ought to wait for the stock to fall much further than its current price before taking a bite.
