Bank of Montreal (BMO.TO)

The banks just got downgraded. They are a whole lot cheaper than they were 2 months ago, so they are getting to levels where they are starting to look somewhat attractive. This one had a bit of a rough quarter, but they are making strides on the domestic side. If they can continue with that, it will be a good place to be. This is a name that you are going to want to be constructive on at some point close to this amount.

What are the strengths and weaknesses relative to other Canadian banks? For a long time it was penalized. They had invested a lot of shareholder capital in Harris in the Chicago area, and the return on their capital over many years has really not been that great. Lately it has been doing a lot better, particularly with expansions they have made in that area. We have often seen this trading at a discount to the other banks, but last year they were probably the best performing bank in the sector. Right now this is selling at a little bit of a discount in the sector at 1.6X Book with the yield of over 4%. He would prefer other banks at this time. He wants banks with a lot of scope like the Royal (RY-T) or high ROE like the CIBC (CM-T).

The market has got it into its teeth somehow, that the outlook for 2015 for bank earnings is flat, which is not very good and therefore ought to be selling these stocks. Banks typically earn between 14%-18% ROE and they pay nice dividends. Just standing still, doing nothing, their balance sheets keep growing. Use these setbacks in the banks to acquire more.

In the context of making a long-term investment, the best time to buy stocks is when people don’t like them. This is the 1^st of the reporting banks, and if we get another surprise, there might be another down day.

He has been buying it for years. Likes their presence in Chicago with Harris bank. As the US does better, so should this bank.

Banks look pretty good here, not spectacular, but okay. The #1 performing bank this year is National Bank (NA-T), an astounding 25% or so. Bank of Montreal is right in line with the other banks and has done reasonably well year-to-date. Nothing wrong with it and thinks it will do reasonably well. Thinks Canadian banks are a little challenged here and regulators are really clamping down on capital requirements. Dividends are going to grow with earnings and earnings are slowing down a little. Don't expect as strong a dividend growth as we have seen over the last couple of years.

This bank seems to have found a footing in the US with their recent acquisition and seems to be trucking along fairly well. He is generally constructive on this bank, but it wouldn't be his top pick. Good dividend yield.

Nothing has changed much for the banks, and he has been gun shy for the last year thinking they were going to slip on some of their earnings announcements. They haven't yet. He took a small position in this because of their US exposure. Mortgage rates keep going down, which should be a boost to the banks.

This is the next breakout among the banks and the cheapest of the big 6. Yield of 3.72%. He can see about a 25% upside, before it runs into any serious resistance.

Has always had a high yield compared to the rest of the group.

Thinks of this as a chronic under performer in terms of its operations. Made a big acquisition in the US, and the jury is kind of out on it. The 1^st couple of quarters looked really great, but on analysis, it turned out that it was a reversal of loan losses on the portfolio.

She likes Canadian banks as a general group. Have lagged the energy and commodity oriented sectors of little. Have all had a pretty good earnings season. This one provides a slightly higher yield than some of the others. You could slowly build a position right now. (See Top Picks.)

Has never been in love with this bank. Always felt it was probably in the bottom 2 of the big 5. Made a big acquisition in the Midwest and he feels the jury is still out on this. Does seem to be accretive to profit right now, but he isn’t very excited about it.

It is somewhat expensive now. The US acquisition they did helped them. He would not do much shifting between Canadian banks.

(SHORT) Long Guardian Capital (GCG.A-T) and short Bank of Montréal (BMO-T). (See comments under GCG.A-T.)