Bank of America (BAC)

(A Top Pick Sept 23/14. Down 3.3%.) Had been looking better up until we had the last correction about a month or so ago. It will go after this pullback is over. Fundamentals are looking quite good.

Bank of America (BAC-N) or National Bank (NA-T)? Buy National Bank. It has a much bigger dividend and trading at much lower multiples. The Cdn$ is cheap here, so why convert unless you have US$. If you do have US$, convert back to Cdn$ and put it into National Bank.

Bank of America (BAC-N) or Morgan Stanley (MS-N)? Thinks there is a lot more value in US banks than in Canadian banks. Doesn’t really have a preference between these 2. The US Bank ETF is a pretty good buy in here. What would really help you is to look at a stock chart and look at the 40 week or 200 day moving average and look where the stock is compared to that average, because it should supply some support.

Just under the 200 day moving average. He likes it. A lot of its mortgage legacy and litigation issues are behind it, so that bodes well. The economy is getting better. Pretty cheap at .75 Price to BV.

This offers very good opportunity. All the banks will move in sync with each other, because they all suffer from the same malaise, there hasn’t been a catalyst for growth and a lot of hammering on them by the government. These banks are inexpensive and offer good value.

This is in an uptrend. Volatility is not overly high. Chart shows a very gentle uptrend. It has a low of $15 which it is testing right now. So long as that holds, and so long as it bounces (give it 3 days as a minimum), he would consider it as a Buy.

Bank Of America or Wells Fargo? Bank of America has a spottier past with balance management and on risks that they have taken. He would defer to Wells Fargo. They have that core banking exposure . They are consumer focused. They have great leverage to a steeper yield curve and to an interest rate increase. They have less capital market exposure. More volatile, less sensitive to a interest rate increase which he feels is on the horizon. Would look to Bank of America if the fundamental came through and if the charts supported it.

There is room for it to move up. He slightly prefers regionals to money center banks but he likes them all. Rising rates will be good for all of them. If the US went into a full-fledged bear market you would have to get out of them.

A lot warmer to US banks than he is to Canadian ones. However, his interest in US banks is mostly regional banks, as opposed to big money centered banks. A lot of their earnings come from security markets. Interest rates are going to go up and he wants to benefit from the banks that will benefit more from that.

(A Top Pick May 13/15. Up 26.98%.) (A Call Option running to 2017.) This is a Leap. It is a story where he thinks you have a year and a half of this option. It is a leveraged play and is like buying a warrant on this bank. He likes the company and thinks they have most of their legal stuff behind them. There will be bumps along the way, which is why he is not interested in owning the stock. If this doubled, he would sell half and keep the rest.

Under Book Value, exposure to US housing and has 10% of US retail banking. Yield of 1.13% and will probably have a dividend increase coming in the next few months. It will also be a beneficiary of the higher rates that are coming in September or December. Probably goes into the $20s a year from now.

All of the US banks are coming back. The catalyst for growth is higher interest rates, which will enable them to make money. He prefers Citigroup (C-N) and Wells Fargo (WFC-N).

He is very pleased about financial services. This is finally working. He prefers J.P. Morgan (JPM-N), which is a much higher quality company, and he feels much more confident about its outlook versus this bank. Valuations are not that much different dollar for dollar. He owns the one which is actually paying dividends.

Finally they beat numbers. The litigations risks are cooling down. They will benefit from the US housing recovery. 0.8 times book value.

Predisposed positively to this bank. US financials got hit with uncertainty, liability and lawsuits about 5 years ago. They had to build their reserves because they had issues with how much they could affect the US economy going forward. We are now just starting to get to the good part where the yield curve is rising and capital markets are responding better.