Bank of America (BAC)

Has a fair number of non-bank financials, but right now he doesn’t own any banks. However, he thinks the banking Outlook is fairly favourable. US banking sector is definitely in the recovery. If he were going into the US banking sector, he would be looking at Wells Fargo (WFC-N) or J.P. Morgan (JPM-N). On this bank he still has some concerns about stuff on their balance sheets such as the takeovers they made around 2008. There’s potentially hidden stuff on this that could cause problems.

One of the multinational banks and he would rather own the regional banks. A lot of their earnings are from capital markets and he would rather not be in this.

(A Top Pick September 12/12. Up 59.17%.) Trading at around 0.7X BV and at around 10X earnings. He feels that things are much more positive down the road. Loan losses are coming down. He feels the stock should trade at either BV or 1.5X BV.

A major global bank. Multiples have gone up as the stock has done reasonably well. A beneficiary of falling US unemployment, a rising US GDP and the same thing in Europe. Trading at a 30% discount to Book right now.

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.