Should you buy Macquarie Group Ltd or Commonwealth Bank of Australia shares?

If you and I were in a Peruvian forest and you put a gun to my head asking me to choose between Macquarie Group Ltd (ASX: MQG) shares and Commonwealth Bank of Australia (ASX: CBA) shares, I’d go with Macquarie shares.

Thank heavens we’re not in Peruvian forest!

Growth or Income?

In the sharemarket, investors often believe they need to pitch a tent in one of two camps: growth or (dividend) income.

One or the other.

However, over the long run, I think you can have both. You can have growth if you pay a good price for your investment. And you can have income if you buy into a profitable, high-quality company.

Macquarie Group

Macquarie is Australia’s leading investment bank, all $30 billion of it. Macquarie does everything from stock market analysis to car financing and mergers. Macquarie is a globally diversified business, too, giving it scale, growth potential and risk benefits.

Macquarie shares are tipped to pay a dividend of 5.5% with franking, which is very impressive for a business that is expected to grow its per-share profits by 5% this year – on top of 75% growth over the past three years.

However, Macquarie’s business is leveraged to the economic cycle. Meaning, its profits will rise and fall in-line with financial markets and the economy, more so than other businesses. While some experts might say that makes it a riskier investment it also means that patient long-term investors are often afforded compelling investment opportunities.

I’m waiting for a lower price before buying Macquarie shares.


Commonwealth Bank of Australia is our country’s largest company and a heavyweight on the ASX. Commbank has powered ahead over the past two-and-a-bit decades of non-stop economic growth.

Indeed, a recession-less Australia, coupled with plummeting interest rates and acquisition opportunities, have paved the way for exceptional returns for CBA shareholders. In the form of both dividends and capital gains, the investment has been very rewarding. 

Unfortunately, I find it difficult to see Commbank growing materially faster than the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the next few years. While I think it can grow profits in coming years, it shares appear priced reflect that growth.

Foolish Takeaway

If I were held up for the next 10 years in a humid South American forest with only one bank share to keep me company, I would choose Macquarie over Commbank. Although it is a higher risk option — and I’m not a buyer of its shares today — I reckon it can outperform its larger peer given its growth potential domestically and abroad.

Fortunately, no-one is putting a gun to my head to buy anything. (see below)

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. You can follow him on Twitter @OwenRask.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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