Bank of Montreal (BMO.TO)

This bank has been making some very strategic moves in terms of getting costs down. In terms of their US exposure, Harris is doing a lot better. They continue to make tuck in acquisitions. Increasing rates will be good for net interest margins. Dividend yield of 3.5%, and has had an excellent track record of dividend growth over the past decade. (Analysts’ price target is $101.20.)

Just reported and made $2.10 versus the consensus of $1.89. Bank operating leverage was up 2.7%. This has really been on fire, and he has not been modelling a lot of growth from this. Trading at a slight premium. There are better ones out there. All the banks are good. He would be Selling Calls on this.

(A Top Pick Oct 23/15. Up 20.95%.) 12 months ago, bank shares were beaten up by short sellers in New York. They continue to outperform most of the analysts’ expectations. That may continue. Still feels Canadian banks are not a bad longer-term Buy.

(Market Call Minute.) Thinks you are okay to own the banks, especially the ones with US exposure. This one fits, but he prefers Toronto Dominion (TD-T).

*Short* (Pairs trade with a Long on GCG.A-T). This one takes out a lot of the market risk for him.

He likes this. The results, along with Bank of Nova Scotia (BNS-T) and Bank of Commerce (CM-T) were a surprise on the upside in Q3. They are doing a good job in the retail area as well as in the US where they have exposure in the Midwest. Good dividend. Thinks their long term targets are achievable, but not in the short term.

Moving more towards a TD type model, more geared towards retail banking. With that, you are going to see more consistent results. Less volatility, less capital market ups and downs. With their Harris Bank in the Midwest, they are branching out in the US slow and steady. Not a bad dividend. He thinks you will see a steadier approach upwards, and constructive.

Prefers Toronto Dominion (TD-T) because of their US exposure and that the US consumer is much healthier than the Canadian consumer at the moment. However, this is one he would be looking at. Expect this will come up with good results. Raised the dividend last quarter, so there probably won’t be a bump this quarter.

Brexit affect on Canadian Banks? His view is that it will be a non-event. This bank is working its way more into the US, which he likes. Last acquisition was good and they seem to be hitting their stride.

4.1% yield. The best performing bank recently. They did a good job of turning this bank around. He is impressed with how they are doing in Canada as well as internationally. He prefers BNS-T, however.

Guardian Capital (GCG.A-T) sold its mutual fund to this bank in exchange for 5 million BMO shares in 2001, and have been sitting on them ever since. He has been Long Guardian and Short this bank since 2009, which was the equivalent of buying BMO for $.50 on the dollar. Since then Guardian has risen about 140% versus the 60% that BMO has. In pair trading, it is how they move relative to each other.

Banks often peak out in the early part of the year. A downtrend was broken. Resistance looks about $82. He is neutral to somewhat bullish on the banks. Hold it if you own it.

(Market Call Minute.) This fits his model of wanting US exposure in a bank, but Toronto Dominion (TD-T) is #1 and Royal (RY-T) is #2 on that list.

You are looking at their operations in the Midwest US. Harris has proved to be quite good for them. They have done well. Now you have US assets and an economy that is stronger than the Canadian one. 4.3% yield.

Executing really well. Capital ratios are really good and were up 11% year-over-year in Q1. Their energy book looks really well contained relative to their peers. They have US exposure which is good. They are trading at a premium to the rest of the banks. This is definitely going to give you dividend growth over time. He would be more of a seller at these levels than a buyer, probably through selling Calls.