Bank of America (BAC)

(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.

Prefers J.P. Morgan (JPM-N) for his clients, which he has owned since about 2012. His thesis was that the US economy and housing market was improving and at some point, interest rates had to go up. They probably all move in similar directions.

This has the potential to put some heat onto Wells Fargo (WFC-N) to regain its #1 standing. It has a wonderful footprint coast-to-coast. Also, they are very leveraged to interest rates. He loves this bank.

It is sitting on a support line of $21-$22. Buy a half position. They are bouncing off support. He favours JPM-N, but has nothing against this one.

This bank and the US banking sector over the last couple of months has retreated a little or gone sideways, partly due to bank stocks having such huge moves going up to the US November election. Feels all those things are still generally in place. We are going to see higher rates in some form of a tax cut. These bank stocks are quite cheap but in a month or 2, they should be a lot higher.

He likes the US banks. This is one of the cheaper ones, trading at under 1X BV. Pays a 1.3% dividend, but they have the potential to increase shareholder capital return to dividend increases and buybacks. They should also benefit from lighter regulation, lower taxes, and higher interest rates. Probably not a bad time to be picking away at this.

When you’ve gone through 15-18 years of up-and-down markets, people through their experience, start to look for the next major problem. The toughest thing in a bull market is to stay invested. This was at $12 in June/16. It rallied to $25. It is okay for it to sit and rest for 2 or 3 months. In the last two quarters they have had great earnings increases. Their BV is growing at 15%. There is no sign that this is coming to an end. An attractive place to be.

Financials are one of his favourite sectors. He would definitely recommend Holding this and buying on any dips. With the fundamentals of the banking sector, the wind is really at your back, because they had been regulated post the crisis, and have so much capital on their balance sheets, that they are the strongest they have been since World War II. By and large, the consumer is fairly healthy, so the loan book is actually quite strong for banks in general. Also, the Fed is embarking on raising rates. As they continue to move higher, higher interest rates are good for bank revenues. If Trump is able to put some sort of deregulation into the banking sector, that is icing on the cake.