Bank of America (BAC)

(Top Pick Nov 1/16, Up 48%) The banks are still pretty cheap and there are catalysts still to come: Deregulations and repatriation of cash. It is still one of his major holdings. You are going to see dividend bumps and buybacks in the US banks.

Well-run. They have good capital markets exposure. Of the 4 money centred banks, this is the most domestically exposed, which is a positive. Technically, it is basically going sideways. There credit/loss has been great. Just announced a $12 billion buyback. He would prefer J.P. Morgan (JPM-N), but both look pretty good.

A much better bank than it was in 2008. It has lots of capital. They could increase their dividend and buy back shares. A better company and they don’t have the liabilities of being sued, etc. Trading at 1X Book. Dividend yield of 1.93%. (Analysts’ price target is $27.)

There is going to be improving loan growth in the US. The charge-off for credits is coming in very benign. This bank gives you a number of different revenue streams including wealth management, capital markets and US loan growth. 75% of their revenue comes out of the US.

(A Top Pick Dec 9/16. Up 20.4%.) Synthetic Long Position. Buy Jan 25 calls at $2.12 and Sell Jan 25 puts at $4.35. The combination of those 2 is going to act exactly like the stock is going to react. If you bought the stock, you would have to do it in US$, but by using this strategy you actually create a credit in the account and you secure it with Canadian Treasury bills.

A better bank than it was 10 years ago. It has more capital, a better cost structure and have gotten rid of assets that are non-core. They can’t acquire things anymore other than a few tuck-in acquisitions on the wealth management side. This means it is going to grow a lot more organically. They have a great wealth management business. The stock is trading at only 1X BV. Dividend yield of 1.2%. (Analysts’ price target is $27.00.)

He is a big fan of this bank. Last week they increased their dividend by 60%, plus increased their buyback to about $15 billion. They have a long way to go to leverage their balance sheet. (See Top Picks.)

(A Top Pick May 5/17. Up 4.94%.) This has a good balance sheet and interest rate increases are going to work for them. Hopefully there will also be a repeal of some of the Dodd Frank act. This is still a Buy.

Up about 85% over the last 52 weeks. These banks just went through some stress testing, with very positive results resulting in dividend increases. He prefers regional banks. If you are going into financials, you want 2 or 3 at least in order to have some diversification. (See Top Picks.)

Financials are cheap, especially in the US. From a BV basis, this is one of the cheaper names. Trading at about 1X Book which is pretty cheap. Raised their dividend, so on a go forward basis, it will be a 2% dividend yield. Announced a $12 billion share buyback yesterday which is positive. (See Top Picks.)

Toronto Dominion (TD-T) or Bank of America (BAC-N)? Not one of his favourite US banks. He would rather own J.P. Morgan (JPM-N) or Wells Fargo (WFC-N). This is amongst the most sensitive US banks to fluctuations in interest rates.

Longer-term, this has more upside. It had a very sharp rise from early November. A lot of the banks have gone up on the Trump trade and then back down. This hasn’t come right back down, because it is more of a valuation play than the pure growth play. Wait for the yield curve to steepen.

He likes the US banks better than Canadian banks. This bank and some of the others derive a lot of their revenue income from the securities industry. He would rather be in the banking business than the vagaries of the security industry.

She has WFC-N. The expectation was very high that rates would be raised yesterday. The yield curve is flattening rather than increasing. WFC-N was not hit as hard during the banking crisis. BAC-N should be slowly improving their dividend.

Bank of America (BAC-N) or Citigroup (C-N)? The primary difference is that this is a domestic focused bank and Citigroup, is international and emerging market focus. There are definite tailwinds to both of these.