Bank of America (BAC)

Its well deserved hit has come. He has no interest in them.

Pretty much shied away from US money centered banks. Banks are really trading off a renewed confidence that everything is not going to fall apart. Really not a lot of growth from a revenue standpoint. Loan growth is anaemic although deposits are pretty strong, which means they are building their balance sheets. This is kind of a negative because they are ending up with larger bond portfolios. Really making their gains through cost cutting which is not a good reason to Buy. There will be a time for them, not just yet.

(Top Pick Apr 26/13, Up 23.03%) This issue about the Fed and their capital is unfortunate. But the theme of this story does not go away. It is a good opportunity to buy it here.

(Market Call Minute) You are going to do well if you stick to it long term.

All of the earnings for the US banks are showing 2 things. On one side, all the big money center banks like this one, are showing some increased earnings, but the reason, in part, is that they are taking out reserves for bad loans. The economy has improved and now they are unwinding those reserves. It is not really core earnings improvement. They are also suffering from the new rules that will apply to their use of capital. He is somewhat neutral on these banks and prefers the European ones, which look a lot cheaper.

Preferred Citigroup (C-N) which was a little bit cheaper, trading at about 8.9X on a forward basis compared to this one at about 10X. Citigroup also has a more interesting upside on the dividend side when the Federal Reserve will give them the ability to increase their dividend. However, he likes the whole sector. As the economy and housing gets better, all the US banks should do well.

Probably has more legs. Lots of financial industry leverage on their balance sheet. US financials are not a bad place to be. Small regional banks give you more bang for your buck if they are recovering.

There is a lot of noise, but it is trading below 1 times book value. 12 months out capital markets, economy, and housing markets will be better, net interest margins are moving forward and loan loss ratios are improving. These big cap bank names will do fine.

That sector is a good one. Prefers JPM, but this one was beaten down in the credit crisis. Has the biggest exposure to the consumer and a good area to be exposed to over the long term. A good hold for sure.

Prefers Exchange Traded Funds because they are not as risky as picking individual securities. Likes US banks and think they have more value than Canadian banks. Feels the US consumer has deleveraged and is going to go back to the bank and borrow money. He would prefer the BMO Equal Weight US Banks Hedged (ZUB-T) ETF.

Still likes this. Has a target price of better than $35. One of the major problems is that every month or 2, more lawsuits come out. Thinks the dividend is going to go up in the next year.

Citigroup (C-N) or Bank of America (BAC-N)? Doesn’t own either one, but if she had to choose, it would be this one. Of the 30 banks checked by the federal government, 5 were rejected and Citigroup was one of them. This bank pays a dividend of $.04 per year, but they got approval to increase that to $0.20 a year. Also, got approval to buy back some stock. She owns Wells Fargo (WFC-N) which has a yield of 2.4% and got approval to increase their dividend by 17%, and as well increase their stock purchase plan for this year.

Great company. Trading at a deep discount to BV. Wells Fargo (WFC-N) and J.P. Morgan (JPM-N) are the gold standards and this one along with Citigroup(C-N) is your next tier. It depends in what type of investor you are. Would have no problem owning this.

Keep in mind that at the beginning of the year, both this and Citigroup (C-N) popped up above his last line, which was EBV (Economic Book Value) negative 3, which he would call an investment strategy “coming out of the blue”. This signifies that finally the market is attaching some credibility to the balance sheet and the numbers that both of these banks are providing to the market. He has a model price of $20.50, which is a 19% upside.

A great story. Has a great franchise in the US on the retail side. Has a great investment banking franchise through Merrill Lynch. Has a great asset management business from the broker business. He can see them executing incredibly well through 2014, especially if the stock market continues to do well. Earning power potential is very strong.