Bank of America (BAC)

A really good space to be in as far as a pro-growth theme goes. Preference should be given to the big money centred banks. Technically it broke out of a basing pattern this fall, and then fell back and tested it. It then accelerated. Dividend yield of 1.6%. (Analysts' price target is $30.)

Technically, this has a pretty good chart. The stock recently broke out above its trading range, so it is definitely in an upward trend. Relative strength is also a positive. Seasonally, we are just entering into the period of seasonal strength. It looks like it is going to go higher both technically and seasonally in the next 3-4 months.

Rising interest rates will help this. The decreased regulatory pressures, international operations are all positive for this bank. He sees significant upside.

Money centred banks tend to do well through an economic expansion, but they are cyclical. They won't do well during a recessionary period. Where we are in the cycle still allows you to own this bank. It is still good value. They will be making a lot of money as interest rates rise, because of margin spreads.

It is not his favourite but he has no issue with it. He is more of an ETF buyer. It is extremely overbought. The yield curve is flattening dramatically so the net interest margin is not going to be there for the banks. Toward the end of next year there is more market risk potential also. There is too much risk to step in at this level.

Still trading at close to tangible BV of around 1X. On a PE basis, it is a little more expensive than Toronto Dominion (TD-T), maybe around 14X versus 12X. With rising interest rates, a slightly better net interest margin, a rebounding America, and the corporate tax plan, this company really stands to benefit. This one is going higher.

His initial sell target on this is $38, so thinks it still has quite a way to go. Thinks it will keep going up and their bottom line will keep on improving for the next little while.

It trades at a 25% discount to WFC-N and JPM-N and is less internationally exposed. BAC-N are returning capital hand over fist. Regulations are continuing to come down. The FED feels capital requirements have hit a max. Regulatory reform is a big positive.

Sell Toronto Dominion (TD-T) and buy Bank of America (BAC-N)? When you own a name like Toronto Dominion, you are generally getting a steadier name, and you are probably not getting levered up as to what is happening in the US with rising interest rates, etc. TD also gives you a better dividend of 3.3%, versus about 1.6% from Bank of America.

(A Top Pick Jan 19/17. Up 32%.) Feels there is still more to come. 2 things will help. He is pretty sure there will be another rate increase, and if tax reform comes, their earnings are going to get a little bounce. The stock is still fairly cheap.

He likes this because of rising interest rates, less regulatory interference and the stock is cheap. Even in a bear market, he doesn’t think this is going to get hurt badly. Dividend yield of 1.7%. (Analysts’ price target is $29.)

It is up a bit. If you were looking for a trade over the next couple of weeks, it would probably work out to get out of this.

$32 is what he sees as an upside. There are some really good drivers for them because they are the money centres and have a lot of levers to pull. (Analysts’ price target is $29.)

Prefers US banks over Canadian banks, as he expects there will be a little more loan growth, especially if you consider that US households have a lot less than Canadian households. This bank has had a fantastic run. It is amongst the large cap banks, so has the most exposure to rising US interest rates.

(A Top Pick May 5/17. Up 13%.) The story on this is higher interest rates in the US. Under the Trump administration, we might see a roll back of the Dodd Franks punitive legislation. The balance sheet is very strong. At some point we are going to see multiple raises of the dividend, but are not quite there yet. This is still a Buy.