On Wednesday I looked at the chances of the Telstra Corporation Ltd (ASX: TLS) share price ending its losing streak and outperforming the ASX 200 in 2019.
I concluded that there are opportunities for Telstra to be a market beater, but that the odds were stacked against this being the case.
Today I thought I would do the same for the Westpac Banking Corp (ASX: WBC) share price. Could it be a market beater in 2019?
Bullish case.
Westpac's shares still look great value to me. Despite rallying an impressive 9% since Christmas Eve, the banking giant's shares are changing hands on lower than average multiples and offer a greater than average 7.2% dividend yield. I think this makes the bank's shares an attractive option for investors that don't already have meaningful exposure to the sector.
Especially if the release of the Royal Commission final report in just over a fortnight contains no nasty surprises. This report is due to be submitted to the Governor-General by February 1, with its recommendations made public shortly after. I think the worst case scenario has been priced in already, which could mean that buyers return in their droves if the recommendations are not as severe as expected.
Bearish case.
There is of course a risk that the recommendations in the Royal Commission final report are more severe than expected and could weigh heavily on the banks. While I'm confident this will not be the case, if it were it would make it hard for Westpac's shares to be a market beater.
Housing market weakness is another concern. Westpac has the most exposure to home lending of the big four banks and could struggle if the housing market continues to weaken. Its rival Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) would be likely to outperform it due to their exposure to business lending which is booming.
Should you invest?
While there is a risk that its shares could underperform the market again in 2019, I remain optimistic that Westpac will be a market beater this year due largely to its valuation and yield and the fact that the dark clouds of the Royal Commission will soon lift.
