Investors have been fixated on S&P/ASX 200 Index (ASX: XJO) financials stock Commonwealth Bank of Australia (ASX: CBA) over the past couple of years.
And with good reason.
In spite of many fund managers and experts warning that the ASX 200 banking stock was materially overvalued, CBA shares continued to rise.
Even after declining around 13% from their recent peak, CBA shares are still up more than 60% over the past two years.
Opting to be underweight on CBA shares caused many fund managers to underperform the index in recent times.
While there's no doubt that CBA is a high-quality ASX financials stock, its valuation remains stretched at above 28 times earnings.
Macquarie Group Ltd (ASX: MQG) has an underperform rating on the stock and a price target of $105.
CBA shares closed at $166.17 on Friday. This suggests the stock has much further to fall before it is attractively valued.
Investors looking for alternatives to CBA shares, may be finding it challenging in an expensive market.
The ASX 200 Index closed at 8,773.50 points on Friday, which is not too far off its all-time high of 9,054.50 points.
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A more compelling alternative
To maintain portfolio diversification, investors may be looking to replace some or all of their CBA holding with another ASX 200 financials stock.
In its post-earnings season research note, Emerging Leaders Reporting season wrap & best picks, Macquarie named one option with substantial upside.
Macquarie has an outperform rating on Pinnacle Investment Management (ASX: PNI) shares.
Its price target is $25.33, which suggests 36% upside from Friday's close price of $18.61.
Pinnacle Investment Management is a multi-affiliate investment management firm. It holds minority equity interests in specialist investment managers, and provides them with infrastructure and distribution support.
Back in July, Macquarie named Pinnacle as a top stock pick ahead of earnings season.
When reviewing its FY25 result, Macquarie highlighted that funds under management (FUM) had increased 63% year over year, standing at $179.4 billion at June 2025. This was supported by positive market movements, acquired FUM, investment performance, and growth from new affiliates.
Macquarie also noted that Pinnacle's FY25 performance fees had increased 40% year over year to $153.6 million.
Foolish Takeaway
According to the majority of experts, CBA shares remain overvalued. However, investors may be struggling to find attractive alternatives to CBA shares in an expensive market. Pinnacle shares are up 279% over the past 5 years. However, they have fallen 27% since 7 August. This could represent a rare opportunity to buy this fast growing ASX 200 financials stock in the dip.
