Bank of America (BAC)

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.

Analysts like the recovery. Stock is probably going to be in the outperform category. If we get a 10-20% correction, it will probably be closer to 20. Wait for the correction before you step in.

Will find out next week if they will be able to boost their dividends. If they don’t get to do it this time, it is coming eventually. In the meantime, you can Buy this at just over 1.25% tangible Book Value. This is a play on the US housing market which, if it is not recovery now, it is going to recover soon. US economy is normalizing. Strong investment banking, very good expense control, good loan growth last quarter, great deposit growth and good execution of their Merrill Lynch asset.

Coming off the stress test, the banks very likely will get the go-ahead to allocate capital with more autonomy. You’ll see both buybacks and increased dividends. Will probably increase dividends first. This bank has done quite well coming off the 2011 low. Trading at about 80% of BV so it still represents pretty good value. His favourite at this point is probably Citigroup (C-N) but that is more on a valuation basis. This bank represents good value.

Financials on both sides of the border have had quite a run and is probably getting exhausted, particularly when he looks at the peaks showing in 2009-2010. Chart is showing a little double top and he assumes the trend line will be violated.

One of the overhangs is the litigation risk, but they are getting it behind them. Should raise dividend in the next 4 months or so.

0.8 times book value. Thinks dividend will go up over the next couple of years and they could buy back stock. They have potential upside from the Merrill Lynch side. This is a great story that is not expensive and thinks you will see a double. Potential earning power is much higher than a Canadian bank.

With the US housing recovery taking place, this is one of the biggest providers of mortgages. Definitely room for growth here. There would probably be a share buyback before there was a reinstatement of the dividend.

Trading at 12X. Housing is improving, credit conditions are improving and there is all this untapped synergy out there yet to go. There are cross/sell opportunities. Some litigation risks, but as soon as that passes, you are going to start seeing share repurchases, dividend increases.