Insights

Why this fundie likes NAB (ASX:NAB) shares in a firming interest-rate environment

The major banks are a good buy right now, according to one fund manager
The post Why this fundie likes NAB (ASX:NAB) shares in a firming interest-rate environment appeared first on The Motley Fool Australia. –

In 2021, and especially in the latter part of this year, much of the talk of the ASX town has revolved around inflation, and by extension, interest rates.

Inflation hasn’t been a pressing problem for Australian policymakers or the Reserve Bank of Australia (RBA) for decades now. But resurgent inflation across many of the advanced economies of the world in recent months has certainly raised some eyebrows.

This is highly relevant for investors because rising inflation, and the higher interest rates that normally accompany it, can have big consequences for any investor’s investment portfolio.

If you weren’t aware, inflation is the phenomenon where the intrinsic value of money decreases over time. It means you will need more nominal currency to buy a good or service than you used to. It’s the reason why your grandparents talked about 5 cent loaves of bread, yet that same bread costs $5 today instead.

Normally, governments welcome a little bit of inflation because it helps stimulate a healthy economy. That’s why the RBA has an inflation “target band” of between 2% and 3%. But too much can cause economic distortions across the economy and is almost universally regarded as undesirable. And that’s why the RBA tends to raise interest rates if it believes inflation is getting ahead of itself.

So how does one position an ASX share portfolio for a world of rising interest rates?

Fundie: Why NAB shares are a good pick for a higher-rate world

Paul Xiradis, chief investment officer and executive chair at fund manager Ausbil, has a few ideas.

Xiradis is confident we will see higher interest rates in the near future. He says that even if they remain below historical levels, “they are likely to be higher than their COVID lows”.

He went on to state “it’s not unreasonable for rates to start to rise and normalise” from here.

In this scenario, Xiradis singles out “the major banks” as worthy investments in this environment. And he “specifically” likes Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB). Why? Xiradis says ASX banks such as CBA and NAB “benefit in positive economic growth conditions when rates are firming” and they have “strong capital positions”.

Xiradis isn’t NAB’s only fan though. As my Fool colleague James covered earlier today, investment bank and broker Goldman Sachs is also bullish on NAB shares.

Goldman has a ‘conviction buy’ rating on NAB right now, with a 12-month share price target of $31.15 (implying a near-10% upside over the next year). Goldman likes NAB for its dominance in the business banking space, which it views as more lucrative than residential mortgages right now.

At the current NAB share price of $28.42 (at the time of writing), this ASX bank has a market capitalisation of $93.14 billion, with a dividend yield of 4.47%.

The post Why this fundie likes NAB (ASX:NAB) shares in a firming interest-rate environment appeared first on The Motley Fool Australia.

Should you invest $1,000 in NAB right now?

Before you consider NAB, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and NAB wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Analysts name 2 ASX 200 blue chip shares to buy now

Are ANZ (ASX:ANZ) and NAB (ASX:NAB) the best ASX bank shares to buy?

5 things to watch on the ASX 200 on Monday

2 ASX 200 dividend shares to buy

3 ASX shares Goldman Sachs rates as conviction buys

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!