Commonwealth Bank of Australia (ASX: CBA) shareholders may not want to see this – particularly if you bought your shares in March.
The stock has fallen another 0.5% today to $82.24, taking its total decline since late March to almost 15%.
For a long time, investors have invested in Australia's biggest bank under the (wrong) assumption that it was amongst the safest stocks on the market.
While its size and generous fully franked dividend were certainly playing in its favour it seems that investors forgot about the importance of a stock's 'price'.
As can be seen on the chart above, Commonwealth Bank's shares peaked above $96 per share in March (at $96.69, to be exact). Westpac Banking Corp (ASX: WBC) and Australia and New Zealand Banking Group (ASX: ANZ) have also recently set new all-time highs, while National Australia Bank Ltd. (ASX: NAB) hit its highest price since before the Global Financial Crisis.
There is no denying that the banks were amazing investments as global equity markets recovered from the depths of the GFC, but they became significantly overvalued more recently whereby their prices have been pushed higher by the market's insatiable hunger for fully franked dividend income, as opposed to being driven by rationality or value.
Although Commonwealth Bank – and each of the Big Four banks – are now trading well below their recent highs, investors would be wise to remain on the sidelines. While it is impossible to predict what will happen to the shares tomorrow, or even next week, the banks remain overpriced and could well be set for further falls.
