It goes without saying (although we have been saying it) that the banks are expensive. They're trading on very high price to earnings (P/E) multiples and also valued at several times the book value of their assets.
Shareholders are backing the wrong horses and the wider market, including Reserve Bank of Australia governor Glenn Stevens, is increasingly acknowledging it.
It's time to think about selling some of your Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB), and Australia and New Zealand Banking Group (ASX: ANZ) shares, and investing for a brighter future instead.
Take Coca-Cola Amatil Ltd (ASX: CCL) for instance. Despite a well-publicised struggle to grow earnings in recent years, CCL shares appear to be on the up as improvements from a strategic review, new brands of Coke and a cashed-up Indonesian business carry through.
Management has promised shareholders a return to mid-single-digit growth for at least the next few years which, combined with a 4% dividend franked to 75%, makes the outlook for Coca-Cola look less risky than that of the banks.
Another company with defensive characteristics and strongly growing profits is Lifehealthcare Group Ltd (ASX: LHC).
A supplier of healthcare equipment to hospitals and specialist clinics across Australia, the group delivered a great half-year report that followed on from a year in which Lifehealthcare met all of its Initial Public Offering (IPO) promises.
With low double-digit profit growth expected this year and long-term tailwinds from rising healthcare demand and an ageing population, Lifehealthcare shares are another alternative to sinking more money into bank shares.
The icing on the cake? Lifehealthcare trades for the same price to earnings (P/E) multiple as the Commonwealth Bank and offers a 3.2% fully-franked dividend in addition to a glossy future.
