In afternoon trade the Commonwealth Bank of Australia (ASX: CBA) share price is down 2.5% to $59.22.

This means the banking giant’s shares are now down 38% from their 52-week high.

Unfortunately for shareholders, one leading broker still believes they could be heading lower from here.

Who is bearish on Commonwealth Bank?

This morning analysts at Goldman Sachs retained their sell rating but lifted the price target on the company’s shares slightly to $56.40.

According to the note, Commonwealth Bank’s third quarter cash earnings of $1.3 billion is running well short of the broker’s second half expectations.

Though It acknowledges that this weakness has been driven entirely by higher provisions for bad and doubtful debts because of the coronavirus pandemic.

Excluding one offs, its profits were running ahead of its estimates. This was driven by better than expected net interest income (NIM) growth and partly offset by higher expenses.

So why is Goldman Sachs bearish?

Goldman Sachs’ main issue with Commonwealth Bank is its valuation. It doesn’t believe the bank deserves to trade at such a premium to National Australia Bank Ltd (ASX: NAB) and the rest of the big four.

Goldman notes that Commonwealth Bank’s pro-forma CET1 ratio, adjusted for announced but not yet completed asset sales, will fall 45 basis points half on half. This will bring its pro-forma CET1 advantage over its peers to <1%, from >1.5% at the end of the first half.

“Therefore, while we remain of the view that the CBA balance sheet looks the most defensive of the major Australian banks (provisions, capital, funding etc), we cannot justify the 25% 12-mo forward PER premium it trades on versus peers (vs. 14% 15-yr av.) and we stay Sell,” it explained.

Its preferred pick in the sector remains NAB. Goldman has a conviction buy rating and $17.50 price target on its shares.

More reading

• Top brokers name 3 ASX shares to sell right now
• ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
• Why Beach, CBA, Qantas, & Xero shares are dropping lower
• What happens to ASX shares if Australian house prices do fall 30%?
• Is the CBA share price a buy?

Motley Fool contributor James Mickleboro 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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We all know the S&P/ASX 200 Index (ASX: XJO) market crash that we saw in March was both brutal and filled with extreme volatility. After all, the ASX 200 went from over 7,100 points to under 4,500 points in just over 1 month – a ~40% turnaround which quickly wiped out years’ worth of gains.

But research from ASX fundie Allan Gray actually proves what we were all thinking – the March market crash was the most brutal the ASX has seen since Black Monday in 1987. Not in terms of sheer losses – the GFC still comes out on top there, but in terms of market volatility.

According to Allan Gray, March 2020’s intraday stock market volatility was:

“Greater than at any other time [since 2000] and significantly exceeded the peaks during the Global Financial Crisis (GFC) between 2007 and 2009. In March this year there were nine trading days with volatility above 10%, seven of them consecutive. During the GFC there were only four days in total with greater than 10% intraday volatility and no consecutive trading days.”

Despite these extraordinary statistics, Allan Gray’s Chief Investment Officer, Simon Mawhinney, stated it wasn’t all bad news during March and investors should take advantage of volatility when it does happen:

“Volatility is your friend when investing for the long term, with the at times extreme fluctuations in price presenting excellent long-term buying opportunities. The causes of the current bout of volatility are certainly different . . . but in each of the previous bouts of market volatility, significant opportunities were presented to long-term, patient investors. It is hard to believe that this will be any different today.”

How do we invest if the ASX crashes again?

I think Allan Gray makes some great points. Yes, volatility can be extremely scary when it does occur, but it also gives us a chance to invest in ASX shares at great prices. Volatility often indicates emotion and irrationality in the markets, which is usually when shares become detached from their intrinsic value. Warren Buffett wouldn’t be nearly as rich as he is today if it weren’t for these kinds of periods.

Just think, anyone who took advantage of the volatility in the Afterpay Ltd (ASX: APT) share price over March would be sitting on gains close to 400% today.

Volatility never lasts, but the decisions you make during those times of high volatility do. Make them count!

More reading

• These ASX shares are set to dominate the post-COVID-19 economy
• 3 common mistakes millennials make investing in ASX shares
• This ASX growth share has rocketed 150% higher since March. Is it too late to invest?
• Why I’d buy and hold Telstra shares for a decade
• How to invest $1,000 like Warren Buffett today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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 ASX fundie says ASX 200 was more volatile in March than during the GFC appeared first on Motley Fool Australia.

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