Bank of America (BAC)

(Top Pick May 29/14, Up 11.12%) It is not expensive. Trading below book at about 10 times earnings. Their M&A side is doing well. The brokerage business and asset management business is doing well. We just need interest margins to do well. He thinks they will move the dividend up when they can.

(A Top Pick June 2/14. Up 10.84%.) Big American banks look like a good place to hide or to look for value. They are going to start paying dividends again at some point. Earnings are starting to turn. At some time interest rates are going to start to rise, which will benefit the banks. Trading at a pretty good discount compared to our banks.

He prefers Citigroup (C-N) and J.P. Morgan (JPM-N). This bank, more recently, has moved a bit more sideways. He can’t say that this is one of the cheaper banks from a Price to Book valuation ratio. He doesn’t mind the stock and thinks it will do okay.

(A Top Pick May 5/14. Up 12.1%.) Trading at .7X BV and 10X earnings. Litigation has now settled down. It is cheap and the recovery in the US is helping them make profits. They are probably going to increase their dividends in the next couple of quarters. Also, interest rate lifts do help financials. He likes it and thinks there is more upside.

This is in an industry where the government seems pretty happy with consistently suing them again and again and again. With their acquisition of Countrywide, they really got ahead of themselves. We have seen the government regulate that company, more so than others, which has had the effect of forcing them to operate within pretty tight guidelines. Has a good retail banking platform. Unfortunately there is a lot of work to be done to get it up to a good level as well as to win government trust. This would be a wait and see, but is certainly one that you could nibble away at. Good value.

To get a lot of growth out of the banks, we need interest rates to go up. Unfortunately, even if the Fed starts raising rates, he believes it will be gradual, so the margins won’t be improving all that much. Meanwhile the domestic recovery in the US has been slower than everybody had expected. Hopefully we are reaching the end of the penalties and fines. This is one of the cheaper names, and when the economy does get rolling it will have a lot of torque. Still somewhat premature.

Call Option. Runs to 2017. It is a LEAP. If we have strength in the global economy and a rise in the rates, this bank has a lot further to go to recover. He thinks it is poised to do a very decent breakout.

Trades at a very big discount to Book, and deservedly so because it went through a lot of problems in the financial crisis, and they are slowly moving out of it. If you believe that the US economy is improving, you could participate in this. Rising interest rates are good for the banking industry. She prefers Wells Fargo (WFC-N) which has been more of a consistent performer and will benefit from the improving US economy.

(A Top Pick March 3/14. Up 1.35%.) When you look at the money centred banks as a group, they are incredibly attractive trading at 8 or 9 times multiple. Warren Buffett likes this. It is a great franchise. Thinks the lift-off really comes when you start to see rates rise.

We are getting closer to the time when the US banks will be taking a leadership position as the Fed starts to tighten. That is a matter of great debate as to when. When that happens, the money centre banks will participate, and perhaps become a leadership group. This is not a bad choice, but feels that Citigroup (C-N) is probably a little better positioned to benefit from a recapture of the valuation spread.

Prefers US banks to Canadian. Past sins have been dealt with. They are freshly recapitalized. This one is quite cheap. Over time it will be a multi-leg rise. He prefers regionals, but has no issue with this one at these levels.

Still very, very reasonably priced at about 10X next year’s earnings. You could step in here and feel comfortable. Pays a decent yield. He prefers buying Canadian banks because of the bigger protection and the bigger oligopoly. Also, you get the advantage of the dividend tax credit here.

One of the most sensitive to a steepening in the US rate curve. On top of that it has a large capital markets business. He wouldn’t be surprised to see $18-$24 in 12 months.

(Top Pick Jun 2/14, Up 3.93%) They are getting through some of the problems they went through during the financial crisis. One of the better of the major banks in the US. Loan growth has been slow, but their acquisition of Merrill Lynch has worked out well and what they have done on the housing side.

(A Top Pick March 20/14. Down 11.58%.) This has been disappointing. It was cheap then and it is cheap now. The thesis is still alive, which is a play on US housing, the eventual loan growth, steadily improving capital levels, etc.