Bank of America (BAC)

He is crazy about the US financial space. There is lots of upside. There is still regulation coming that will help the banks. Higher interest rates will help net interest margins. The US consumer is confident and is able to spend and borrow money. This bank tends to benefit from that. This is the most levered to the US consumer. You won’t go wrong with this, although the yield is awfully light at 1.2%. (See Top Picks.)

He believes it has high growth potential. He bought right before the election. It represents the best play on rising interest rates. It should get 50 cents a share increase for every percent rise in interest rates, plus there is deregulation.

This has had a big move post the election, and sort of treading water now. If we are in an environment where we are going to see rate hikes, and that appears to be upon us for the balance of this year, that is going to be good for financials, particularly the banks. Also, throw in some deregulation on some of their banking activities, and that is a positive for them as well. These stocks are still trading below their historic price/book value, even though they’ve had big moves up recently.

Seasonally, the best time to own this is from right around now until approximately May of each year. Technically, the stock is in an upward trend, and testing its recent highs. It is outperforming the market and has positive momentum, and we are just about to enter the period of seasonal strength. It looks like an excellent opportunity to add more positions.

Their earnings came out the other day and were block buster. This happened with only one interest rate bump. Clearly there is some nice momentum going. They ought to be creating excitement amongst investors. He is hoping Trump will take a look at what the banks are allowed to pay out. There should be room for dividend growth. (Analysts’ target: $24.72).

The investment community has gotten very, very positive on US banks, because of Donald Trump and deregulation. US banks are really complicated and there are so many different things going on inside these banks. They are probably going to ease some restrictions, which is a good thing. However, these restrictions were put on, because the banks did bad things. Rising interest rates will be positive for banks, because they will have higher earnings. Conversely, we already have US consumers struggling on subprime model loans. Mortgage finances are going to slow down. This is a tough call. Feels that a year from now they could be kind of flat from here.

If looking for the stock that is going to most benefit from rising US interest rates, regulatory reform and a stronger economy, you have to go with this one. However, look at how this has moved since election day. We are not going to have another 30%-40% in the next 2 months. On any pullback below $20, he would be jumping on this. Trading very close to BV right now. He likes this for the long haul.

Event timing is quite tough. Two events that investors should remember are Brexit and how the market reacted to that and the second was Trump being elected. No one would have predicted what would have happened within hours of his election. Interest rate increases since the election and the prediction of growth leading to inflation caused massive moves in stocks. The banking sector is driven by where interest rates are going. She owns C-N. Both events were positive for the banking sector.

(A Top Pick Feb 11/16. Up 109.35%.) This has done incredibly well since November 9. It is still trading at .8X Book. (Canadian banks are trading at close to 2X Book.) It has a great franchise, whether it is retail or investment banking. He can see a lot of room on the upside. Try to Buy on weakness.

He likes the big banks in the US. This is probably one of the more interest rate sensitive banks in the US, so if interest rates move up, you’ll probably get a pretty good lift on the stock price. Wouldn’t be surprised if this gave back some of its recent gains, but is still a good Hold.

He sees more upside. There are several reasons to like it. The chart is scary. He is recommending it here. It stands to benefit after being handcuffed for nearly 10 years. They have gone the extra mile to streamline their product line up and reduce costs. They are going to benefit from being a more streamlined operator. They will get the tail wind of higher interest rates. (Analysts’ Target: $23.81).

He loves it. It is coming out of the blue. The regional banks trade at higher valuations. He is looking for BAC-N to benefit from less regulation and more dividend increases. He is looking for an increase in the first quarter.

The minutes from the Fed indicated inflationary pressure if the Trump government goes ahead with the fiscal stimulus they have been talking about. Lending spreads go up as interest rates go up, and banks can make more money. It seems to be a positive environment for the banks. The question is, is it already priced in? He is positive on US banks right now.

Bank of America (BAC-N) or Citigroup (C-N)? He prefers this, because they have done a very good job of exiting low margin businesses. Also, they have a very strong retail franchise in the US. They can’t make any more acquisitions, but they can grow organically. The yield curve probably steepens by about 100 basis points. For every hundred basis points steepening in the yield curve, this bank makes $5.3 billion of more revenue. Has a great franchise name in investment banking, a great retail franchise, great commercial and wholesale franchise, and a good wealth management franchise.

US banks stand to benefit from the political reforms. They have a lot to gain because they are the most harshly regulated. Lower corporate tax rates will help them. He would expect faster dividend growth that you have normally seen as well as share buy backs. A lot of good things are already price in, however. Weak economic data is their biggest risk.