My recent post touched on the resilience of the Australian property market throughout 2020 and the solid outlook going into 2021. With that in mind, it is worth checking on the Big 4 bank stocks; Commonwealth, ANZ, Westpac and NAB.
Financials were some of the hardest hit blue chips during the CV-19 downturn earlier this year. The yearly chart below shows the brutal sell off these stocks witnessed from February (up 10% since the start of the year) to late March (down around 40%). True to its status as the ‘Rolls Royce’ of the Big 4, CBA sold off the least in the initial downturn. Nonetheless it was still a time for bargain hunters, with the stock falling from over $90 to under $60. Meanwhile, other Big 4 banks remarkably broke their GFC lows.
It just shows the extent of the panic and media-driven frenzy of March. In 2008 the world financial system was legitimately close to imploding while there was no such financial disaster in 2020.
Bank shares languished for a good two months at these levels before a jolt higher, and then another one. I was very happy buying CBA at sub-$60 as I saw it as one of the lowest risk buys in the market. Now at circa-$83, I’m comfortably up, yet could have made more money elsewhere in hindsight. Such is life. My last bank buy was ANZ around September, but now I don’t see the value on the table anymore.
However, I’m still modestly positive on 2021, though I don’t see the same possible gains as buying this year amongst the turmoil. The recent rebound in lending has been driven largely by owner-occupiers, for bank shares to get the next leg-up I think we’d need to see some stronger activity in the investment segment of the market. The positive news is it’s currently in the doldrums meaning the only way is up.
How much money is sitting on the sidelines potentially going into property in 2021? Or will investors have been deterred due to uncertainty around international students (a key segment of the rental market) and increasingly bold government intrusion into private rental agreements this year.