ASX bank shares have been tumbling lower in 2020, but could they be back in the buy zone?

Why are ASX bank shares trading cheaply today?

The biggest factor hammering the S&P/ASX 200 Index (ASX: XJO) lower in 2020 is the coronavirus pandemic. COVID-19 has brought the global economy to a standstill as borders have shutdown and people have been forced indoors.

But the Aussie banks have been hit particularly hard this year. In fact, ASX banking shares are underperforming the benchmark index by some margin as loan impairments rise and dividends are slashed.

Initially, APRA was putting pressure on the banks to conserve cash in the current environment. However, investors are now wondering if earnings could suffer and dividends could continue to fall due to lower profits as well.

Is it a good time to buy?

All of these headwinds have spooked investors into selling off the banks in droves. However, the fact is that the ASX bank shares like Commonwealth Bank of Australia (ASX: CBA) remain a pillar of the Aussie economy. While there is the rise of neobanks threatening their business model, many Aussie banks are actually backing their own horses in this race.

For instance, National Australia Bank Ltd. (ASX: NAB) is behind UBank while Bendigo and Adelaide Bank Ltd (ASX: BEN) supports Up. This could mean the increasing popularity of neobanks might not be the death sentence for ASX bank shares that many expect.

Furthermore, despite softer earnings, CBA still posted a half-year cash profit of $4.5 billion. COVID-19 will pass and I think we could see Aussie banks continue to pay strong dividends, albeit at lower levels, well into the future.

Foolish takeaway

No one knows where the ASX 200 is headed in 2020. However, I think the ASX bank shares are still high-quality companies with strong earnings potential. This could mean now is a good time to buy your favourite bank’s shares at a discounted price.

More reading

• 5 things to watch on the ASX 200 on Wednesday
• Top brokers pick the latest ASX stocks to buy today
• Is it time to buy ASX banks?
• Here’s why the Fortescue share price hit an all-time high today
• Is the ASX 200 getting too far ahead of itself?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) has been on strong form over the last few trading days, which has led to a number of shares storming higher.

A few shares have even climbed so much they have just hit record highs.

Three shares which are flying high right now are listed below. Here’s why they just hit record highs:

Ansell Limited (ASX: ANN)

The Ansell share price reached a record high of $35.00 on Tuesday. Investors have been fighting to get hold of the health and safety products company’s shares due to the increasing demand it is experiencing during the pandemic. This has particularly been the case for its hand and body protection solutions which offer protection from infective agents. In light of this strong demand, the company was able to reaffirm its guidance. It expects earnings per share in the range of 112 US cents to 122 US cents in FY 2020.

Fortescue Metals Group Limited (ASX: FMG)

The Fortescue Metals share price jumped to a record high of $13.95 yesterday. Investors have been buying the iron ore producer’s shares due to the resilience of the price of the steel making ingredient during the pandemic. With the iron ore price at this level and Fortescue on track for record shipments this year, the miner looks well-placed to deliver bumper profits and free cash flows. This is likely to lead to the company rewarding shareholders with generous dividends and potentially share buybacks.

Pushpay Holdings Ltd (ASX: PPH)

The Pushpay share price stormed to a record high of $6.80 on Tuesday. The donor management system provider’s shares have been racing higher since the release of its full year results earlier this month. Investors were impressed with Pushpay’s 1,506% increase in EBITDAF to US$25.1 million and its very positive guidance for FY 2021. Management expects its EBITDAF to grow 91.2% to 107% next year. But perhaps even better is the company’s longer term ambition of winning a 50% share of the medium to large church market. This represents a US$1 billion revenue opportunity, which is materially more than FY 2020’s operating revenue of US$127.5 million.

More reading

• Here’s why the Fortescue share price hit an all-time high today
• 3 fantastic ASX shares to buy now to get rich later
• Macquarie picks the best stocks to buy for the post COVID-19 rebound
• Could ASX 200 iron ore shares save the Australian economy?
• 3 ASX shares that will have strong dividends in 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Ansell Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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