Commonwealth Bank of Australia (ASX: CBA) and Coles Group Ltd (ASX: COL) shares are starting October from very different positions.
CBA shares are trading around $150.30 on Friday, not far from their 52-week low. Coles shares, meanwhile, are around $23.05 and much closer to their 52-week high.
Even so, I would be happy to buy both.
Image source: Getty Images
CBA shares
CBA has become more interesting to me as the share price has moved closer to the lower end of its recent range.
The shares are only slightly above their 52-week low of $146.97, which gives investors a much better starting point than they had earlier in the year.
I still would not call CBA cheap in an absolute sense. Consensus forecasts point to earnings per share (EPS) of $6.67 in FY27 and $6.86 in FY28, compared with $6.58 in FY26. That means investors are still paying a premium for fairly modest earnings growth.
But I think there are reasons the market consistently gives CBA that premium.
It is Australia's largest bank, has a powerful deposit franchise, and remains a leader in digital banking. Those strengths have helped it build a highly profitable business that I would be comfortable owning through different economic conditions.
The dividend supports the buy thesis. CBA paid $5.05 per share in FY26, with consensus forecasts pointing to dividends of $5.15 in FY27 and $5.30 in FY28. This represents dividend yields of 3.4% and 3.5%, respectively.
For me, I like the combination of quality, resilience, and a gradually rising dividend at a share price much closer to the year's lows.
Coles shares
Coles is a different story. Its shares are trading around $23.05, not far from their 52-week high of $24.59. Ordinarily, that might make me more cautious.
But I think the earnings outlook gives the share price some support.
Coles generated EPS of 81.3 cents in FY26. Consensus forecasts point to EPS of 98.2 cents in FY27, $1.05 in FY28, and $1.15 in FY29.
That is a much stronger growth profile than CBA, with earnings expected to rise by more than 40% between FY26 and FY29.
I like that Coles combines this growth with the defensive qualities of supermarkets.
Australians still need groceries regardless of what is happening in the broader economy, while improvements in efficiency, supply chains, and operations can help Coles turn steady sales growth into stronger earnings.
The dividend is also expected to move higher, from 78 cents in FY26 to 83.5 cents in FY27, 88.8 cents in FY28, and 97.4 cents in FY29.
So while the shares are close to their highs, I think the business has the earnings growth to justify a higher valuation than it commanded a few years ago.
Foolish takeaway
I would be buying CBA and Coles shares for different reasons in October.
CBA appeals to me because the share price has come back towards its lows while the underlying business remains strong.
Coles is closer to its highs, but I think its earnings trajectory gives the shares room to keep progressing.
For me, both still deserve a place on the buy list.
