ASX bank shares such as Commonwealth Bank of Australia (ASX: CBA) have been on a tear over the last few weeks. Even though CBA shares have pulled back today (at the time of writing), they’re still up more than 17% since 25 May.

And it’s not just CommBank. The other ASX major banks Australia and New Zealand Banking GrpLtd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) have all seen similar, if not more enthusiastic moves in recent weeks.

Now, that’s all well and good for any shareholder that picked up ASX bank shares any time over the last 2-3 months.

But what of the long-term prospects of our big 4? Well, one ASX fundie isn’t betting the house (or even the barn) on a triumphant return to banking supremacy and flowing ASX bank dividends.

Are ASX bank dividends in trouble?

According to reporting in the Australian Financial Review (AFR), Airlie Funds Management’s portfolio manager, Matt Williams is holding a more bearish view of the banks for the coming months and perhaps years. Williams has stated that the banks are set to bear the brunt of the withdrawal of various government stimulus measures.

The federal government has embarked on the largest social spending program in history. Measures like JobKeeper and the coronavirus supplement payments for those on JobSeeker and other government payments launched in an attempt to blunt the edge of the coronavirus’ impact on the economy.

But, as Williams points out, these measures were never designed to be permanent and are heading towards a wind-down phase in the coming months. When this happens, Williams warns that the banks will bear the full impact of this cliff:

“They are the backstop for all this and how this plays out over the rest of the year… we’ve got 10 per cent of mortgages on deferral [and] 6 per cent of SME loans on deferral. So … as some of the stimulus is withdrawn, what’s going to happen to the bad and doubtful debt charge?”

As a result of this, Mr Williams is saying the banks will struggle to return to paying the level of dividends investors have become accustomed to in the past, stating:

“I think that’s clear from the crisis, they are paying too much in dividends. I think conservative boards will really rein in that payout ratio. So I think with dividends shrinking a bit, it’s hard… to make a really strong bullish case for the banks.”

What does this mean for ASX investors?

I think Mr Williams has a very strong point here. And anyone who holds ASX bank shares should be thinking very carefully today about what to expect from their banks over the coming years. There are a lot of headwinds right now in the banking sector, without the company of too many tailwinds. Low-interest rates aren’t good for bank’s profitability or their ability to fund dividends. Neither is sluggish economic growth and reduced appetites for credit. These are all factors the banks are facing today (and will probably continue to face for years).

As such, I have to agree with Mr Williams in not being too bullish on the future of the banks for the next year or so – especially from a dividend investing perspective. Farther than that? Frankly, who knows. But it’s not a risk I’m willing to take today, that’s for sure.

More reading

• Why Afterpay, Amcor, Computershare, & Westpac shares are dropping lower
• ASX bank share prices tumble as they aren’t out of the COVID-19 woods yet
• ASX 200 drops 2%: Big four banks sink lower, JB Hi-Fi to deliver strong profit growth
• What is the ASX impact of a fall in house prices?
• My share investing journey during the pandemic

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. 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 Wesfarmers Ltd (ASX: WES) share price has been caught up in the selloff on Thursday and is dropping notably lower.

At the time of writing the conglomerate’s shares are down 3.5% to $42.30.

Is the Wesfarmers share price in the buy zone?

I think this pullback could be a buying opportunity for investors looking for strong blue chip shares to buy for the long term.

Thanks to its collection of quality businesses such as Bunnings, Kmart, and Officeworks, I believe Wesfarmers is well-positioned to achieve solid earnings and dividend growth over the next decade.

Another positive is the hefty cash balance the company is sitting on following the sale of part of its stake in supermarket giant Coles Group Ltd (ASX: COL). I expect these funds to be used to make earnings accretive acquisitions in the near future.

Overall, I think this puts the Wesfarmers share price is in the buy zone right now. Though, not everyone is as positive on the company as I am.

A note out of Goldman Sachs this week reveals that its analysts have placed a neutral rating and $42.50 price target on the company’s shares.

Why is Goldman lukewarm on Wesfarmers?

The broker explained that its neutral rating is due to valuation reasons.

Using a sum of the parts and discounted cash flow valuation model, it sees $42.50 as fair value for its shares. This means there is limited upside for investors over the next 12 months, even if you include dividends.

Though, it does see a number upside risks that could lead to a positive revision to its valuation. These include improvements in consumer sentiment around discretionary purchases, a faster turnaround of the struggling Target business, value accretive acquisitions, capital management, and favourable rental negotiations.

However, until these potential factors become a reality, Goldman is sticking with its neutral rating.

Instead, it prefers Harvey Norman Holdings Limited (ASX: HVN) in the retail sector. This morning it put a buy rating and $4.05 price target on its shares.

More reading

• Why I think Wesfarmers is the best ASX blue chip
• Leading brokers name 3 ASX 200 shares to sell today
• ASX 200 jumps 2.4%, unloved shares keep rising
• Not keen on Westpac? Then buy these top ASX dividend shares instead
• Can the Wesfarmers share price continue to rise after its market update today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. 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.

The post Is the Wesfarmers share price good value? appeared first on Motley Fool Australia.

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It is an important practice to properly review your stock investment portfolio on a regular basis and ask yourself questions like: “Why do I own shares of Monadelphous Limited (ASX: MND) at its current share price?” For me, this is just before the end of the financial year because it helps me with my tax planning. I would recommend doing something similar annually, bi-annually or every quarter when results are announced.

During this year’s review, I found myself asking the question: “Do I still want ‘in’ at the current Monadelphous share price?” This is a very personal question so it is important to define who I am as an investor and my investment strategy.

My share investor profile

• Demographic: Generation Y
• Investment time horizon: 50 years +
• Investing experience: High
• Risk tolerance: Very high
• End goals: Join the Financial Independence Retire Early (FIRE) movement and go travelling. Pass on a legacy to my kids.

My share investment strategy

Because I have so long to invest and minimal financial commitments, I am able to be an ultra long-term, aggressive growth investor. My strategy is to build a highly diversified portfolio of quality growth companies with a lot of risk yet massive multi-bagger potential. I invest funds into the market on a monthly basis (or as close to as possible).

So, at the current Monadelphous share price, should I keep owning shares?

Monadelphous is a share that I bought at the start of my investing career. At the time there was an increase in capital expenditure in the materials sector and Monadelphous was benefitting as a result. My investment was also benefiting with a gain of up to 28% (excluding a healthy dividend) within a few years. Unfortunately, that all changed and I’m currently sitting on an annualised total return of about half of what the S&P/ASX 200 Index (ASX: XJO) has achieved. The Monadelphous share price is $12.70 at the time of writing.

In general, I’m not a massive fan of the resources sector because there is no real pricing power. Often the lowest cost producer wins, but there is still direct commodity price risk. But, because I was so keen on diversifying at the time, I felt I needed some exposure to the sector. Monadelphous seemed like a great shot because not only was it exposed to capital expenditure during boom times, but it had a strong and growing maintenance business to soften the cyclical nature of the industry.

With many more years of investing under my belt, I now have a very diversified portfolio. Further, I know that so long as I am comfortable with my sector allocations I don’t need to be invested into everything out there. Monadelphous like Challenger Ltd (ASX: CGF) doesn’t fully align with my investment strategy, so I have to ask myself if I should hold or sell. Right now, I’m not sure.

Foolish bottom line

Writing your investing reasons down is extremely important. It allows you to understand what you were thinking at the time, without any hindsight bias. This makes it a powerful tool for making buy or sell decisions with your shares. Additionally, it provides a great resource for educating yourself as an investor. 

Investment strategies and goals will change so a point of reference is crucial. Invest based on your own personal circumstances and goals at that point in time.

More reading

• All Technology Index sees stunning comeback
• Top brokers name 3 ASX 200 shares to buy today
• Is the Scentre share price cheap today?
• ASX bank share prices tumble as they aren’t out of the COVID-19 woods yet
• ASX 200 drops 2%: Big four banks sink lower, JB Hi-Fi to deliver strong profit growth

Motley Fool contributor Lloyd Prout owns shares of Monadelphous Limited and expresses his own opinions. The Motley Fool Australia owns shares of and has recommended Challenger Limited. 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.

The post Should I keep my stake at the current Monadelphous share price? appeared first on Motley Fool Australia.

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