The S&P/ASX 200 Index (ASX: XJO) is dominated by two sectors – ASX bank shares and ASX mining shares. Those two industries have seen very divergent performances.
In 2024 to date, the BHP Group Ltd (ASX: BHP) share price is down 22%, the Rio Tinto Ltd (ASX: RIO) share price is down 19% and the Fortescue Ltd (ASX: FMG) share price is down 41%.
Whereas in 2024, the ASX bank share space has seen the Commonwealth Bank of Australia (ASX: CBA) share price rise 26%, the Westpac Banking Corp (ASX: WBC) share price rocket 42%, the ANZ Group Holdings Ltd (ASX: ANZ) share price jump 20%, and the National Australia Bank Ltd (ASX: NAB) share price increase 26%.
Looking at those numbers, we can see the biggest difference is that the Fortescue share price has underperformed the Westpac share price by more than 80% in 2024 to date.
Should investors back the banks to keep going or switch to the beaten-up ASX mining shares?
Fund manager view on these sectors
The portfolio managers of the listed investment company (LIC) WAM Leaders Ltd (ASX: WLE) recently held a webinar to update investors about the LIC's performance and comment on various industries and stocks.
According to reporting by the Australian Financial Review, portfolio manager John Ayoub said:
The valuations of stocks that have perceived certainty and quality has gone beyond any fundamental basis that we have seen for a considerable period of time.
On the other side of the spectrum, we're seeing more and more stocks hit 12-month lows, pre-COVID lows, and unsustainably low valuations which is forcing boards to rectify the valuation disparity.
Ayoub pointed out that CBA, NAB, ANZ and Westpac are businesses that are not delivering the earnings growth to justify their higher valuations.
He suggested that large institutions are buying bank shares while paying little attention to the value they're getting, with superannuation funds being one of the possible culprits of ongoing buying. Global institutions have supposedly been selling some of their Chinese shares and investing in ASX blue-chip shares, leading to a crowding effect in these stocks that are seen as safer options.
WAM Leaders believes there could be a turning point in the market where investors may quickly sell out of ASX bank shares and buy ASX mining shares.
Ayoub said:
The easy trade has been sell resources and buy banks, but when that unwinds, there's going to be a rapid snapback.
So we need to get ahead of that and start building positions, which we're doing now.
WAM Leaders is looking at ASX mining shares such as BHP and Rio Tinto as opportunities.
