First off, I would echo Strawman's concerns about the banking sector in general and about NAB in particular. People talk about how the banks will always be good investments over long periods of time, and that is of course based on past history. They had everything going for them for a very long time, and that environment has now changed considerably. Very low interest rates for a number of years are going to hurt them. Their net interest margin (NIM) is going to be lower, which directly affects their profitability - adversely. They are going to have to increase their bad and doubtful debt provisions due to the current recession and associated higher unemployment. In short, if you're in your twenties and want to buy some banks now and leave them in your super fund for 40 years, you could do well, but my view is they're going to get cheaper, so if you want to hold them, you could wait and buy them at lower levels. If you're more of a hands-on, active self-directed investor, you can do a LOT better than the banks.
In FY2020 (the financial year just ended), the worst 3 sectors were Energy (down 29.2%), then Banks (down 27%), then Insurance (down 23.9%).
The best performing sectors were Consumer durables & apparel (up +45.9%) followed by Pharmaceutical & Biotech (+32.3%), Software & services (+19.9%) and Retailing (up +15.2%).
Of the size categories, the MidCap50 has outperformed (down 2.1%) from the Small Ordinaries (down 5.4%), the ASX100 (down 10.6%) while the ASX50 (which includes the banks) was down 12%. Mids and Smalls have outperformed Large Caps. That's interesting, because smaller companies usually get sold down the most when there is a crash or correction, and I believe that was the case in March, however, they tend to soar higher and faster during a recovery, as we saw in April and May.
In general terms, unless a large company has been irrationally sold down to unsustainable levels - which certainly can happen - they tend not to double or triple - in share price terms - over one or two years, like smaller companies can. Of course the share price of smaller companies also have risk on the downside, they can halve or drop 90% a lot quicker and more often than you are likely to see in the large-cap space. But in general terms you are likely to get more bang for your bucks from smaller companies, and you can reduce the downside risk by doing plenty of research (sometimes called due diligence or DD) and choosing the companies you invest in wisely.
In terms of NAB specifically, they have been perennial underperformers for decades. One of the arguments I keep hearing is that there is more upside in NAB because they have underperformed the other banks for so long that they MUST be due to outperform. That's the "every dog has his day" argument. Investing is sometimes a little like betting on horse racing. There is certainly an element of luck involved. However, if you spend a lot of time studying the form guides and researching the horses, the jockeys, the owners, and the industry, you can certainly gain an edge on other participants. Would you say, "that horse has run last or second last in every race for 10 years, so I'm going to back it - because it's GOT to be due to win soon"? I hope not! Even if the horse got a new jockey and a new owner, and a shiny new stable, it's probably still going to be a loser. And that's how I feel about NAB.
Another "positive" I hear about NAB is that they have more exposure to business banking than CBA, ANZ or WBC (who are all more exposed to residential housing and less exposed to business). Some pundits claim that at various points in the cycle, greater exposure to businesses and a lower exposure to residential housing is going to benefit NAB. Again, if it hasn't in the past 20 or 30 years, why would it now?
I personally believe there are likely to be a lot more defaults on business loans, personal loans, and housing loans, which will affect ALL of the big 4 banks. And will affect MQG (Macquarie Bank) a LOT less, which is why they are my preferred exposure in the sector - they are really a firm of global asset managers now, not a domestic bank at all. However, even Maquarie look too expensive to me at current levels, so I don't own any MQG shares either. I certainly don't hold any NAB, CBA, WBC or ANZ shares! Whether one bank will be adversely affected MORE or LESS than the other 3 is a mute point. You don't HAVE to own banks at all. There are so many better places to invest where the industry and the individual companies within it have strong tailwinds instead of headwinds.
Another argument for the banks is that they pay above-average dividend yields and will continue to do so, so they are pretty hard to beat for income-seeking investors. I believe that the bank's dividends will continue to reduce because of the headwinds they face. Their share prices might reduce even more, so their yields might continue to look acceptable even as they are reducing (because of their reducing share prices). However, if you suffer a significant capital loss (due to share price decline) that is significantly greater than the income (dividends) produced by that investment, it will NOT have been a good investment. And there's a significant opportunity cost there. While you have money tied up in one or more of the 4 banks, you could have had that money invested in something that was rising in value - which would drag the share price up too - sooner or later.
In summary, our 4 big banks are NOT going broke. You won't lose your entire investment by investing in them. Our Australian Federal Government will ensure that they do NOT fail. But they are very unlikely, in my opinion, to be among the best opportunities in our market over the next few years.