Bank of America (BAC)

There has been a basing going on for quite a while. There are three peaks and we just came off the third. You buy at $15 and sell at $18.50. Longer term indicators are just starting to turn up. He does not think you will see a spectacular move on this and he prefers JPM-N

He is a big fan of this bank. It has been challenging year for all the banks. It pulled back because interest rate hikes were not coming. They announced their earnings and blew it out of the water with $0.04 above expectations. Also, said that if their trading revenues did not pick up and do the kind of things they are expecting, they are going to get out of that business. Thinks the real rally in the stock is going to come when the Fed actually raises rates. You can buy a $17 Call for Jan 2017, or even the 2018 if you want to go away out. He would buy and see what happens.

It is probably a very good entry point here. He compares it to JPM-N. At these levels BAC-N looks interesting. There could be a period in time when the European banks outperform the North American banks. This one is a good hold for 5 years.

He views all of the banks as being under the same influence. He owns C-N and WFC-N. BAC-N moved away from a lot of their troubles. They have the ability to catch up a little bit more than the more senior banks. There is some catch up in terms of valuation.

(A Top Pick Dec 12/14. Down 8.26%.) CEO has done a fantastic job of picking up the pieces of what was a pretty distraught company a few years ago. Thinks this is better value right now and has better sensitivity to rising interest rates.

Wealth management and investment banking are 40%. They are 60% retail banking. It had a tough time moving up, not all regions are recovering at the same pace. He chooses regional banks.

This is a great entry point. Very rarely can you look at a large cap like this, and pick it up at less than 10X earnings with the prospect of significant earnings growth. Thinks the EPS potential is $2. If you put a 10X multiple on that, you can easily get to $20. This is going to be loan growth and a combination of lower expenses that will really drive the EPS expansion he is expecting. Dividend yield of 1.24%.

(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.