Finally, shares of Australia and New Zealand Banking Group (ASX: ANZ) have bucked off concerns of a bleak economic outlook, surging an impressive 3.3% in afternoon trade.
In fact, ANZ shares have rallied an impressive 5.85% since the beginning of the week. In the process, it has rewarded shrewd investors who knew economic concerns throughout Asia, particularly China, wouldn't go on forever. For comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up just 3.4%.
Is it time to buy ANZ shares?
Despite what its trailing full year profits may indicate ANZ shares remain richly priced. In fact, even after the 19% fall in share price over the past six months, its shares trade at a price to book ratio of 1.57x.
ANZ, Westpac Banking Corp (ASX: WBC), Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB) each boast low price-earnings ratios and pay big dividends thanks to an ability to drive huge profits from their highly leveraged balance sheets. Thus, it's imperative for value investors to buy major bank stocks during times of genuine duress, or else investors choosing to be impatient face the possibility of steep capital losses.
As a rule of thumb, the time when credit markets dry up and all bank stocks trade below 1x book value (i.e. less than the value of their balance sheet), could make the ideal moment for a purchase of ANZ shares.
Until then, I suggest savvy income investors look for other great dividend stock ideas on the market.