Commonwealth Bank of Australia (ASX: CBA) shares could struggle to ever reclaim the biggest ASX stock crown from S&P/ASX 200 Index (ASX: XJO) mining giant BHP Group Ltd (ASX: BHP).
The two ASX titans aren't in direct competition with each other. But investors have been watching their market caps closely this year as they vie to remain the highest-valued company trading on Australia's stock exchange.
Here's what's been happening.
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BHP takes a commanding lead over CBA shares
On 27 January, BHP reclaimed the title of biggest ASX share from CBA. This came after the big four ASX 200 bank had enjoyed that crown for almost 18 months.
The crown then got handed back and forth a few times over the following weeks as one stock outperformed the other.
But BHP now looks to be cementing its lead, with the BHP share price buoyed by strong iron ore prices (currently at around US$110 per tonne). Meanwhile, copper prices (currently at US$13,411 per tonne) have surged by 45% over the past 12 months.
At the same time, CBA shares are under pressure. That's partly due to ongoing analyst warnings on CBA's overvaluation relative to its peers. And investors are also increasingly concerned over Australia's economy potentially leading to lower home loans with higher defaults.
Connecting the dots, BHP shares have gained 48.52% over the past year, while CBA shares have fallen 5.68% during this time.
At market close on Wednesday, this saw BHP commanding a market cap of $291.32 billion compared to CBA's market cap of just over $270 billion.
What are the experts saying about CommBank and BHP shares?
Charles Casey, a portfolio manager at Solaris, has a decidedly bullish outlook on BHP shares.
According to Casey (quoted by The Australian Financial Review):
The diverging performance is led by the outlook for earnings and dividends, which is improving for BHP and Rio Tinto Ltd (ASX: RIO) but is deteriorating for Commonwealth Bank, and that's why we saw such a big derating in the valuation applied to CBA last week.
If you're trading to perfection like CBA was, there's just no room for disappointment.
As for why BHP could continue to outpace CBA shares, Casey said:
BHP is really well-placed at the moment to keep deleveraging and growing its earnings and dividends into August. BHP is one of our key holdings, and we've been very underweight CBA…
With the copper price high, this talk of electrification and obviously the building out of data centres, it looks like demand will stay strong for a while.
Regal Partners' Phil King also sounded a bullish note on ASX mining stocks like BHP (quoted by the AFR).
King noted:
The next five or 10 years look extremely exciting for the mining sector. There's going to be very little new supply in commodities like copper over the next five years. I don't think the outlook for the mining industry has ever looked better.
With King speculating that global copper prices could increase by another fivefold over the coming five to 10 years, he said BHP shares could surge past $100 within the next few years.
"Even then, we'd still be happy to be long," he said.
