Shares of Commonwealth Bank of Australia (ASX: CBA) have rocketed 1.7% higher today to trade at $83.80 after falling to a low of $79.19 as recently as last week.
Although there are still a number of genuine concerns facing Australia's financial sector (and the broader economy, as a whole), investors appear to be gaining confidence in the stock following a comment made by Berkshire Hathaway CEO and legendary investor, Warren Buffett.
As quoted by the Fairfax press following Berkshire's strategic investment in Insurance Australia Group Limited (ASX: IAG) yesterday, Buffett said that his company had looked at Australia's banks as another potential investment. He said" "I'm looking at the banks, I would say there is a good chance that five years from now, we will have bought one or more positions in Australia's banks."
Shares of Commonwealth Bank, National Australia Bank Ltd. (ASX: NAB), Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) have all rallied since those comments were published.
Is Commonwealth Bank too cheap to ignore?
Although they have risen over the last week, Commonwealth Bank's shares still trade at a 13.3% discount to their all-time high, recorded in March this year. This, together with Buffett's comments, might prompt some investors to conclude that now is the perfect time to buy shares of the bank.
Before you even consider buying the bank's shares however, it is important to note the timeframe set by Buffett: "I would say there is a good chance that five years from now, we will have bought one or more positions in Australia's banks."
I've added emphasis on the 'five years from now' to highlight the fact that Buffett is not purchasing the banks' shares just yet, but will instead wait for a better opportunity to do so. Although each of the banks have fallen in price recently, they are still expensive investment prospects which could struggle to grow earnings in the coming years due to the strong headwinds facing the industry.
Given their cyclical natures, there will come a time to buy the Big Four banks, but that time is not now. From their current prices, I believe it will be very difficult for them to generate market-beating returns in the long-run and they should be avoided by 'Foolish' investors, for now.