Bank of Montreal (BMO.TO)

In view of his other two Past Top Picks, this demonstrates why you don't build a 3-stock portfolio ;) Doing well in US. Bad credit is starting to show up in non-prime, but all the banks are running squeaky-clean credit portfolios.

Will continue to own as long as it's technically sound. Doing a great job across business lines. Not adding at this time. It can be on your list to add once markets improve after current correction.

Likes it. Stable dividend, never cut. Assets grew in wealth management because markets went up. They get fees on the higher asset base. Banks could be under pressure if inflation starts to rise, so be cautious. For new $$, diversify elsewhere.

When rates rose in 2022, hit the hardest with loan losses (especially in US).

Don't have to rush out to sell. Premium valuation. He might lighten up and look for laggards such as US financials, lifecos, pipelines, utilities.

Outlook is favourable. He owns BMO, RY, and TD. All 3 had good earnings, with TD probably the best. But the other two were also strong.

Tight, well-regulated oligopoly. A need, not a want. Diversified by geography and line of business. Good line of sight through the cycle to high, single-digit rate of dividend growth. He's overweight the banks.

The smaller 5 of the Canadian Big 6 banks (RY aside) tend to take turns doing well. Believes it was 2 years ago that BMO outperformed everyone, so not surprising that they lagged this year. Good US operation, and may be able to pick up some of the slack that TD's not able to capitalize on.

When he looks at the sector, great numbers across the board. Many raised dividends, ROEs are improving. Yield curve is more upward-sloping, which is helping. PCLs have been a concern and ticked up, but less than what market expected. Better growth numbers. Expectations for earnings numbers are being increased. All the names are looking good here. 

When he looks at banks, he looks at the dividend and growth at the most reasonable price. Really likes BMO here. 

It was the lowest-quality beat of all the banks reporting. The beat was because they released provisions back into earnings. The only one of the Big 5 she doesn't own. Always trades at a premium, and she doesn't understand why. 

Issue last year of quality of US loans. Took a lot of provisions, but now has released those. This signals everything in the US is OK, but she disagrees based on where we are in the credit cycle. The release is premature.

His firm owns RY, BMO, and TD as cornerstone holdings in its dividend-growers mandate. Canadian banking is a stable, well-regulated oligopoly. Structurally profitable, heavy barriers to entry. Diversified by line of business and by geography. Its fee-based businesses should be very profitable this quarter.

One fly in ointment:  tepid loan growth demand, especially in mortgages, and to a lesser extent in commercial loans. Thinks the worst of credit loss provisions is behind the Canadian banks.

You could add to this one here. 

Whole Canadian banking sector is fully valued, trading effectively at record highs on valuation. Not time to load up. Time to take some profits and invest in more defensive names, as Canadian economy is on a more fragile footing than other parts of the world.

Prefers this one and remaining peers today to RY, just on valuation. Though RY is the best bank in Canada, this name trades at a far better multiple.

Broke out. So far, so good. Trend is up. Higher highs, higher lows. Nothing wrong with the chart. 

Banks look to be extended, but pipelines seem to be reaccelerating (TRP, ENB). Given his view about a potential correction coming soon, doesn't mind rotating a bit out of BMO and putting some into ENB.

If you own this name and you're comfortable selling it at this level, as you think it's not going to go up from here and may even go down, then this seems like an OK strategy. 

For him, he typically likes to leave a bit of upside between where the stock's trading and where he sells the call. 

If you look at the Canadian banks, they're pretty stable businesses. Volatility's not as high, so neither are the options premiums. Selling something closer to the money, or even in the money, can make sense. You're really riding a fine line that what you expect is going to happen actually does over a short period. That's pretty hard to predict, so he'd leave a little bit offside.