I dont think people buy CBA based on fundamentals anymore. You cant make a rational case for a 2.95% dividend yield (4.2% grossed) with a risk-free rate of 4.5%. When you pay out 80% of your earnings and haven't grown EPS for 10 years. You should be trading at a premium to the risk-free rate.
People buy it because they think it will continue to go up, and it goes up because people buy it. They don't even realize they are eating their own tail. If indeed superfunds are buying CBA, is the capital gain real? Because they cant sell it to themselves. If you threw 1m into an illiquid stock that turns over an average of 20K a day, and the price goes up 1000%, how do you crystalize the capital gain when it was you that drove the price? Who do you sell too?
Do we really have superfunds just banging new member contributions into CBA and bidding up the price, locking in new member contributions to pitiful returns? Lets say superfunds want to lock in the capital gains, how many buyers are there to meet the demand given they are the buyers? The stock will tank if they sell.
'Valuation doesn't matter'… until it does.
CBA Price at posting:
$157.85 Sentiment: Sell Disclosure: Not Held
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