The outperformance by CBA over BHP has been dramatic over the last 18 months, but it’s started to snap back since late June: BHP has rallied +14% while CBA has fallen 8%, a more than 20% relative move, and we are looking for more of the same over the coming weeks/months:
- BHP – We are initially targeting the $43 area, or another 6% higher.
- CBA – We are initially targeting the sub $170 area, or another 6% lower.
Neither of the above targets is overly ambitious compared to recent moves, but they are still meaningful regarding portfolio performance. In general terms, we feel the rotation from banks to resources has travelled only ~60% of its journey, and more rotation could be afoot, considering the huge performance imbalance over recent times.
- We can see BHP outperforming CBA by at least 10% over the coming weeks/months, especially as we head into the traditionally weak August and September.
MM prefers BHP over CBA until further notice
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BHP Group (BHP) v Commonwealth Bank (CBA)
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BHP Group (BHP) v Commonwealth Bank (CBA)
