Is the Macquarie Group Ltd (ASX: MQG) share price a better buy than ASX bank shares like Commonwealth Bank of Australia (ASX: CBA) right now?
The Macquarie share price has been on fire lately, rising from $114 per share in June last year to today's share price of $146 (at the time of writing). That's a 28% turnaround in just eight months (not including dividends either).
By comparison, the CBA share price is up just 5.3% in the same period, whilst the other ASX banks like National Australia Bank Ltd. (ASX: NAB) and Westpac Banking Corp (ASX: WBC) have actually gone backward.
So does all this mean Macquarie is the best bank for a buy on the ASX today?
What sets Macquarie apart
The 'big four' ASX banks have an awful lot in common. All four compete exclusively in Australia and New Zealand and get most of their earnings from mortgage and business loans. And perhaps most importantly, all four suffered immense damage at the hands of the 2018 Banking Royal Commission (albeit to varying degrees).
Macquarie has none of these characteristics. Although most people refer to Macquarie as a retail bank, these days it's more of an asset manager/investment bank. Traditional banking services (i.e. mortgages, credit cards and loans) only make up roughly 12% of its overall earnings.
Instead, its successful asset management business is Macquarie's crown jewel – with its Macquarie Capital division a close second. These businesses draw a lot of earnings from outside Australia – which helps insulate Macquarie from some of the issues facing the other banks, such as low interest rates.
Are Macquarie shares a buy today?
Macquarie shares are slightly more expensive than the other banks. On current prices, Macquarie is trading on 15.35x earnings. Of the other big four banks, only Commonwealth Bank is asking more (at 18.4x). NAB shares are currently asking 14.8x earnings, while Westpac and Australia and New Zealand Banking Group (ASX: ANZ) are trading on 13.1 and 12.2 respectively.
Macquarie does offer a lower dividend yield however – something to keep in mind if you're an income investor. Whilst NAB, ANZ and Westpac all have trailing dividend yields over 6%, Macquarie is 'only' offering a 4.18% on current prices (CommBank is on 5.11%).
Of course, if history is anything to go by, Macquarie's higher growth rates more than make up for this yield deficit in terms of total returns.
Foolish takeaway
I think Macquarie is a great company to go with if you're looking for more exposure to the financial sector or just a solid growth and income stock. They don't call Macquarie the millionaires' factory for nothing after all!
