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Short n Sweet – Which bank?

Charlie has his eye on banks, and I’m pretty sure that most of our subscribers will be avid readers of his article today. But he’s not the only one who loves the Big Four. Switzer Super Report co-founder and director Paul Rickard has had his eye on the yield play – that is, buying the banks for the dividends because interest rates are so low – for over a year now.

In May last year [1] he said: “I don’t subscribe to the “banks are overpriced” theory, simply because there are no signs of the forces that could really threaten earnings or make bank shares less attractive.”

His preferred bank for all of last year – and yes, he used to work there – has been Commonwealth Bank and in May, Paul pointed out that: “Sometimes there are good reasons why stocks are expensive – and it pays to invest in those stocks rather than their cheaper cousins. Commonwealth Bank (CBA) is one such case.”

But as the table below shows, it was the more expensive bank that had the greatest share price return, and as it has the biggest dividend, it also had the greatest total return.

The dates below are each of the dates that Paul updated his view on the banks – and CBA remained on top each time.

[2]

Also today, fund manager and small cap guru Geoff Wilson writes about IPH Limited as one of his favourite undiscovered stocks. He must be a real fan as he also pointed to it in mid December as one of his all-time picks for 2015.

We’re not advocating that you become a short-term trader but you might like to know that if you had bought it back then at around $3.40, you would be 7% ahead now, as it is trading above $3.60.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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