The Commonwealth Bank of Australia (ASX: CBA) share price leaves a lot to be desired, but Class Ltd (ASX: CL1) shares and Gentrack Group Ltd (ASX: GTK) shares are tempting.
Commonwealth Bank
According to the 16 analysts polled by The Wall Street Journal, 13 analysts believe Commonwealth Bank shares will produce the same — or lower — returns than the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).
At over $85, it's easy to see why some analysts are being turned off CBA shares. For one, its valuation currently stands at a significant premium to its peers, like Westpac Banking Corp (ASX: WBC), and the broader market.
What's more, many investors believe the property market — to which CBA is heavily leveraged — has experienced unsustainable growth.
I must admit, I'm not sure if the property market is 'hot' or not, but I know it is cyclical. And if I were to guess, I'd say we are closer to the top than the bottom of the cycle.
2 shares to consider
Instead of the 'usual suspects' like CBA, I'm focusing my attention on the smaller end of the market, trying to find the companies that people don't usually consider for their long-term portfolios.
Here are two of my favourites:
1. Class
Class shares have rallied 105% since they listed on the ASX in 2015. The $340 million company specialises in developing software for accountants and financial advisers. In its key market of self-managed superannuation funds (SMSFs), the company is taking market share away from competitors. It has also launched a new product called Class Portfolio.
2. Gentrack Group
Gentrack is Kiwi software business specialising in technology for utility and energy companies. Its software is ingrained in company systems, making it an invaluable tool for many customers. It also means its revenue is recurring. The $315 million company recently announced a relatively large acquisition in the UK to boost its market share.
Foolish Takeaway
Investing in the sharemarket is a long-term (three years minimum) pursuit – anything less is pure speculation. Considering that time horizon, does it make sense to pay a price above fair value for a slice of CBA? In my opinion, it doesn't. Especially when there are other — faster growing — dividend shares to consider.
