CBA, the unlikely widow maker
For value investors, Australia's biggest bank is a conundrum. It is expensive on every measure but its share price keeps on flying and has defied gravity for almost two decades.
Widow maker trades are historically the domain of smaller, volatile, less well-understood stocks. Before the great reckoning for buy now, pay later, Afterpay was a widow maker for all those who could see the fundamentals of BNPL were flawed and bet against it — at $10, $50, $100. It finally peaked at more than $150.
Typically, blue-chip, established market leaders are not widow makers. They’re too well understood, too much a part of the index and too liquid.
Unless you’re Commonwealth Bank.
The market in general has been underweight Australia’s biggest bank since it was around 80 bucks. Today it’s comfortably above $110 — up more than 20% from its most recent trough of $96 in October.
Even today, the average recommendation of the 14 banking analysts covering CBA is sell. According to S&P CapitalIQ estimates, the target price for CBA is $90.57 — around $25 below where the stock is trading. The average rating of the analysts is 4.29 (5 is a sell, 1 a buy).
