Bank of America (BAC)

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.

The next stress test is in September. Buy now or wait and see? It depends on what other bank exposure you have in your portfolio. He likes the US banks, primarily the regional banks. What is nice about this bank is that it does generate a large part of its revenues from retail banking. If you have some patience, this is a name that you want to own in your portfolio, but if you want to take it one step further, he would look at some of the regional banks.

Likes this stock. Net interest margins are very low in the US and are under pressure. Although they cut costs, they didn’t see a lot of growth on the investment banking side. They are in 10% of all the households of the US, so they are a very large retail bank that needs net interest income to improve. They also are faced with a lot of regulatory issues. They have to do another stress test in September and he is upset that management has not been keeping an eye on these things. Thinks you should own this for the longer-term.

Prefers US banks over Canadian ones. There has been a big hold back for the really big US banks, where the feds are taking a really close look at their ability to withstand another 2008-2009 type scenario. He doesn’t own any banks and prefers specialty financing companies instead. (See Top Picks.)

Prefers US banks over Canadian banks. This bank is probably one of the lower attractive names, but you will do fine with it.

To him this is a Wells Fargo (WFC-N) in waiting. There was some really poor management during the financial crisis that has resulted in a lot of baggage. The CEO has a real mandate to getting it back to being a retail bank. If it does succeed, it will have a real retail footprint. However you are going to have a lot of baggage to get there. There are better quality banks in the meantime.

(Top Pick Mar 3/14, Down 2.27%) The catalyst is the overhang over banks including nay-saying, litigation and so on. This is the cheapest group on the market. Warren Buffet sees this as a long term opportunity. The overhang is in the rear view mirror.