Bank of America (BAC)

(Market Call Minute.) Berkshire Hathaway has just extended its option to be one of the biggest shareholders of this bank, and you should too.

(A Top Pick Dec 9/16. Up 4.39%.) Synthetic Long Position. Had Bought a Call and Sold a Put which created a position equivalent to buying the stock itself. US banks have been flat and have been almost dead money for most of the year. This is good until January, so he would hold onto this position.

He likes the US financials. The banks are well positioned and are cheap relative to others banks around the world. He prefers C-N for its very international revenues and JPM-N for their management. They are going to continue to pass the stress tests and then can do shareholder friendly things like share buybacks and dividend increases.

ZUB-T vs. BAC-N. ZUB-T is hedged back to CAD$ and is an equal weight mix of US banks. With the economies strengthening around the world these banks can do well. He feels ZUK-T would be okay without the hedging.

If you are a long term investor, the financials are good, although they are rolling over in the short term. He is not as big a fan of the major city banks as of the regional banks. He would keep it.

This is early days for this bank. It still trades well below BV. Earnings are going to really grow dramatically as the yield curve steepens and interest rates start to rise.

He would not pay $24 for it. He does not average up. They just raised the dividend. Higher interest rates should bode well for them. Continue to hold.

The Trump regime is potentially looking at rolling back the punitive Dodd-Franks act. Because of that, this bank is probably going to do quite well.

(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.)