Bank of America (BAC)

Likes the US banks but doesn’t own them mainly because the dividend yields are basically lower than Canadian banks and are penalized at a higher tax rate.

Has gone through difficult periods. In the next 3-5 years, the Euro will have trouble. When that happens the banks will come under pressure. Thinks there is another shoe to drop in the global growth story.

Has done very, very well. He would be inclined to say there are better places to put your money in the US financial services sector.

There is more upside. Dividend will finally get restored. Another favourite of the hedge fund community on the long side.

New CEO seems to be more focused on the long-term, which is what he likes. He is keen to have the lawsuits go away. They are looking to build a longer-term retail franchise as a bank. There will be lumpiness in the short term, but long-term you could hold it for a little while.

He would not be a buyer of banks. They have had a great run. It depends on the Federal Reserve and what they are going to do with interest rates. If interest rates start to move higher, which they have, we are going to see a slowing mortgage market in the US.

(A Top Pick July 16/12. Up 85.22%.) Management has done a tremendous turnaround job. Dividend is still only a $0.01 and he can see that going up to $0.05 over the next 2 years or so. He can see the stock price going up to the mid-$30 again. They are not completely out of the woods. They still have to deal with all kinds of fall outs.

This bank and Wells Fargo (WFC-N) would probably be in the lead is far as mortgage origination is concerned, so they will probably have the greatest potential uptick in the short term. However, net interest income is not rising in the US as it should be. Same thing in Canada. It still has to issue more debt and equity to get up to the Basil 3 levels.

Likes the large US banks a lot. Looked quite hard at this, Citigroup (C-N) and J.P. Morgan (JPM-N) and decided to go to J.P. Morgan. You can own one or all 3. As long as the US economy continues on this right track and housing improves, you’ll be fine.

Trading below BV and really improving its ROE. Going forward, that environment should continue. There probably will be dividends down the road and it is just a matter of how long they may have to wait to get an OK from the government to distribute dividends.

Buy Jan 15 Calls at US$1.79. $15 is the price that he is willing to buy the stock by January 2015. Thinks Bank of America has a lot of upside. This is a levered way to play it and doesn’t think the options are overpriced. If the stock reaches $25, you are looking at a-500% return. Your downside risk is $1.79 in a worst-case scenario.

Trading at about 30% discount to BV. This is a bombed out US financial and this would be a good time to Buy. 2 things are going to happen. 1.) Confidence in the banks is going to start to come back with a better economy, better housing market and lower unemployment and 2) their earnings are going to start to go up.

Prefers this over other US banks because in a relative sense, of the large multinationals, this has the largest exposure to a housing recovery. To be fair, there is probably a write-off coming so it is currently right around tangible Book. Even still, that makes it roughly half of a Canadian bank on a price to book ratio basis.

They won’t be able to increase dividend in the next little while. But their numbers look better than other larger banks in the US. He took his weighting down and is moving money from US to Canadian banks. He is comfortable with the valuations in this one, however. Cheap compared to book value and loan growth is picking up.

Given the pullback in the housing in June for the US and the relatively high unemployment, are US financials overvalued? Not sure we should put full faith in one month’s numbers. A lot of the shortfall came off multi-residential housing, not single residential. Banks in general are doing well on the banks of cost-cutting right now. That is fine, but it is finite. They have to get their loan growth up which means there has to be an economy that is strong enough that wants the loan and the banks have to want to lend. In both cases, there is some reluctance. Also, yield curve has to normalize so it actually pays to borrow Short and lend Long.