Commonwealth Bank of Australia (ASX: CBA) shares have been a great investment in recent years.
Australia's largest bank's shares have outperformed the market and delivered very strong returns for investors.
But with its shares firmly in the expensive category, investors may find better value elsewhere in the market.
For example, the team at Morgans, courtesy of The Bull, believe the ASX 200 stocks listed below would be better picks for investors.
Commenting on CBA shares, the broker said:
CBA is a high quality bank with strong market share, but its valuation is stretched relative to peers. It trades on a significantly higher price-to-earnings ratio compared to global counterparts. Slowing credit growth, margin compression and rising household financial stress poses a risk to earnings. With limited upside and a premium valuation, we believe it's prudent to lock in some gains and rotate into better value financials.
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Which ASX 200 stocks are better than CBA shares?
One ASX 200 stock that Morgans is tipping as a buy is Pinnacle Investment Management Group Ltd (ASX: PNI).
The broker likes the investment management company due to its exposure in active funds management growth and its diversified earnings. It also sees its shares as undervalued following recent weakness. Morgans said:
Pinnacle offers leveraged exposure to the growth of active funds management via its multi-affiliate model across equities and private credit, among other alternatives. With stakes in a range of boutique managers amid a scalable platform supporting distribution and infrastructure, the business benefits from diversified earnings and embedded operating leverage. Strong affiliate performance and offshore expansion provide catalysts for long term growth. We believe the stock is undervalued relative to its quality and growth profile. The shares have fallen from $25.33 on August 7 to trade at $18.41 on October 2.
Another ASX 200 stock that the broker rates highly is REA Group Ltd (ASX: REA). It is the property listings giant behind the dominant realestate.com.au website.
Morgans thinks that a recent pullback in the REA Group share price has created an attractive buying opportunity for investors. It said:
REA Group provides Australia's leading digital real estate platform, with dominant market share and strong brand recognition. Its core Australian site benefits from an appealing and dynamic network and consistent product innovation. International expansion, particularly in India, adds a long runway for growth. We view the current price as an attractive entry point for long term investors seeking quality growth exposure. The shares have fallen from $263.16 on August 22 to trade at $225.80 on October 2.
