Bank of America (BAC)

He sees nothing wrong with it. 2011 was a pivot point. He would not be discouraged. If we break above $18, it is a break out. The volume has to increase, though.

A stock he thinks will do well and is well positioned going forward. Something stable and steady and gives you a bit of yield, and trades at a 10X multiple.

It looks cheap, but if you go back to pre 2008, it was cheap then. He looks at companies that were trading higher before 2008. Even though BAC-N has been transformed since 2008, he would not see it as a long term hold.

Royal Bank (RY-T) or Bank of America (BAC-N)? Look at the economies of both countries and the balance sheets of both stocks. This one has a lot of good things going forward, specifically if you think rates are going to rise in the US. That will have a tremendous leverage to the uptick in rates.

(Top Pick Feb 18/15, Up 7.55%) Consumer credit started growing again. But it took all the way to December for the Fed to lift rates and it is hard for them to make money on widening spreads when interest rates are not increasing and they run a spread business. He thinks earnings will accelerate with increasing rates.

He is positive on all US banks at the moment. They have been going sideways for quite some time and he feels there is some pent-up energy. Interest rates going up should theoretically be good for them.

He thinks you should own a couple of US financials, from an interest rate point of view. Dividend yield of 1.16%.

Tech and financials are his top US investments. Valuation wise they look interesting and are trading at a discount to book value. You might see some of the acquisitions they did start to come back and generate some earnings. He sees improving earnings growth.

He paid a little over $6 for his holdings and has a target price in the mid-$30. Expects the CEO wants to increase the dividend further. They seem to be through most of their legal expenses. He is happy holding this and can see it doing a double from here.

One of their senior people said that for every 1 point increase in interest rates, they are going to make about $4.5 billion, which works out to about a $5 per share potential increase in stock price using an 11X multiple. The catalyst for growth in US banks is loan growth and a steepening yield curve. Also litigation costs are starting to drain out and getting much more manageable.

He is a fan of US banks, but not a fan of money centred banks like this. They have banking divisions, but also have big investment banking divisions. He likes regional banks that are just pure banks such as BBNT out of Wilmington North Carolina and Bank United out of Florida.

This is kind of a regional bank on steroids, given that they do have a meaningful retail banking presence. About 60% of their revenue is retail banking, but 40% is wealth management and banking investment. If you want exposure to wealth management and retail banking, this is a great name to own. Reasonable valuation. He feels the upside is really in the regional banks.

All of these big US banks are back from the dead. This one has recapitalized, making money hand over fist, and he sees probably rising dividends. Thinks this is a reasonable buy. Not his favourite among American banks. This would be his 4^th pick behind J.P. Morgan (JPM-N), Goldman Sachs (GS-N) and Wells Fargo (WFC-N).

A multifaceted diversified bank which you have to take apart a little bit here. Branding is phenomenal. Got hit pretty hard as a result of mortgage lending with some of the acquisitions, as a result of Merrill Lynch. Had a tough time coming out of the crisis, and there is still the depression and valuation. Has about 75-80 points of BV right now, so there is definitely an argument to be made on valuation. Litigation is coming down. There are definitely some tailwinds. Domestically focused, so there isn’t the emerging-market exposure. The problem is that they have an enormous regulatory burden for years to come. Capital returns should be picking up in order to catch up to their competitors, but at the end of the day it has a discount and a reasonable valuation for a reason. He doesn’t mind it. Prefers midcaps including SPDR S&P Regional Banking ETF (KRE-N).

US banks have a slightly different period of seasonal strength from Canadian banks, and is related to when their year end occurs. This occurs in January in the US versus the end of November in Canada. Technically the stock has been in a trading range for the last little while. If it gets above the top of its trading range, then you could see a move going forward. Historically, this bank has done very well around the end of January right through until April of each year. It is a little too early to be invested in this bank for seasonal trade.