Bank of America (BAC)

(A Top Pick May 15/12. Up 90.72%.) He is continuing to buy this. Banking industry in the US is cheap. The BV of this company is $20 and he thinks at some time in the cycle it will trade at $20.

(Market Call Minute) Doubled in last year. Cheap, but litigation risk. But it could do well.

(Market Call Minute) It’s cheap. Harder to analyze so not his top pick.

Likes the banks, US financials. his favourite is JP Morgan,

Bank of America is trading around 13x earnings. feels is a good investment.

US banks are hard to analyse, he looked at 3 banks, Bank of America, JP Morgon and Goldman Sachs. Bank of America was the hardest to analyse especially because of the real estate assets. That said, because of the US recovery the opportunity to sell the "gnarly" properties is getting better day by day. Feels Goldman Sachs or JP Morgon is the better investment opportunitiy.

Had a lot of overhang from litigation issue. But more of a concern for him is understanding what is the catalyst for growth. Loan growth is anemic. Turning assets at less than 1%. If it is just a cost cutting story or people feel better about it now, that is not a reason to buy.

This is a company where people have not seen the restructuring that has gone on. Below tangible book value. Has some really good capital and really core businesses. Tailwinds from lawsuits are disappearing. Thinks dividends will be 1.5% next year. They are buying back shares. Non-performing loans are coming down.

Stock is down because, although it is growing, it is slowing. Everybody hates when they hear slowing growth. It is not going to grow its earnings 50% any more; it is back to a normal 5%-10% earnings growth. What he likes about this one and the whole US banking sector is that the housing market is improving, US consumer is improving, banks are flush with cash and they are now allowed to buy back shares. Prefers the safety of a Wells Fargo (WFC-N) or a J.P. Morgan (JPM-N) but he would have no problem adding this one as a 2^nd or 3^rd U.S. Bank.

(A Top Pick April 17/12. Up 3 2.21%.) Probably the only US bank that he would still look at buying at this point. Thinks it can go over $30. Their profit quadrupled. They are taking care of business in terms of lawsuits. Just laid off a lot of workers.

Likes the US banking space. This one in particular has a lot of leverage to recovery in the housing market through their mortgage portfolio. Has a very, very small dividend but has potential for increasing dividends over the next couple of years.

All US banks are really growing right now through cost cutting. This is because there net interest margins (what they make off the spread of borrowing short and lending long) isn’t a money-maker for them and the return on assets are below 1. Senior banks you might want to look at would include J.P. Morgan and Wells Fargo. 2^nd tier banks would include Bank of America and Citigroup. Second-tier means they are a little riskier but the reward side might be a little greater.

(Market Call Minute.) Better run than Citigroup (C-N) but he prefers regional US banks. (See Top Picks.)

Sees modest appreciation, similar to the Canadian banks stocks, so he would rather own Canadian banks. Had a great run off the bottom. Management has done a very good job of rectifying their past problems. With spreads as low as they are and loan demands still very, very modest, he doesn’t see a lot more upside.

(Market call minute.) Everyone is keen on American banks right now and he thinks it is time to take profits.

Expects there will be a dividend increase this year. He is more favourable on US banks then on Cdn banks but this is not one of them. He is more interested in regional banks which have higher quality and better growth prospects. (See Top Picks.)