Company Interview / Why John's nabbing this banking stock

Key Points:

Supermarkets Coles (ASX:COL) and Woolworths (ASX:WOW) seen as attractive despite regulatory overhang Banks viewed as fully valued versus resources, with NAB (ASX:NAB) offering a technical opportunity Positive outlook on BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Breville Group (ASX:BRG) on earnings and demand themes

John Lockton from Sandstone Insights sets out a constructive view on several major Australian stocks, suggesting recent volatility may open opportunities for investors. Lockton notes that Coles Group (ASX:COL) and Woolworths Group (ASX:WOW) trade near calendar year lows following regulatory scrutiny, with sentiment dominated by headline risk over potential fines. In his view, higher inflation pushes basket prices and price-to-earnings ratios higher, and current levels for both supermarkets may represent an emerging opportunity, with a preference for Coles in the near term. He regards Metcash (ASX:MTS) as structurally weaker than the big two due to disruption and weaker competitive positioning.

Turning to financials, Lockton attributes most of Commonwealth Bank’s (ASX:CBA) sharp fall to budget-related concerns rather than its trading update. He suggests market expectations for slower credit growth may already be priced in, but questions whether elevated bank valuations are sustainable if house price growth flattens. From an asset allocation standpoint, he sees better earnings momentum and less stretched valuations in resources versus banks.

Within banks, Lockton highlights National Australia Bank (ASX:NAB) as the laggard year-to-date, arguing that its capital raise and related technical selling may create a near-term entry point. He also maintains a positive stance on BHP Group (ASX:BHP), Rio Tinto (ASX:RIO) and Breville Group (ASX:BRG), citing inflation, global capex and supportive commodity and coffee machine demand trends.