Bank of Montreal (BMO.TO)

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

It’s fine. He holds it forever. It’s core.

Likes this. Earnings continue to increase. Dividend yield of 4%. Model price calculation of $85.87, a 16% upside. Likes the banks here. They all have double digits in terms of upsides to model price. He would buy this in US$’s.

A falling Cdn$ should help Canadian banks because they have assets in the US. Also, it is stimulative to the economy. This is a great bank stock. Just lowered their basil 3 by about 56 basis points last quarter, which means capital deployment is going to be harder to do, probably for the next year. Trading at a slightly higher valuation than others.

(A Top Pick Jan 18/13. Up 20.12%.)

This is usually classed in the 2^nd tier of banks. Made a big acquisition about a year ago to expand their Chicago holdings. Canadian banks that don’t have enough exposure to outside of Canada would be a concern. Prefers others.

Made an acquisition of a wealth management operation, mostly fixed income, in the UK. Canadian banks have done very well in general because Canadian economy and housing market has been weathering a downturn. The issue for everybody is looking for growth and this bank is no exception. We still have to see how well they can execute and integrate their acquisitions.

Back when he considered them they were not focused on growth but focused on dividend. The others were growing 2% faster and this one had a 1% higher dividend.

3-year GIC at 1.8%? This is a short-term investment. Hope that this is not in a taxable account as your after-tax return will be almost zero. If it is in a sheltered plan or an RRSP you are going to earn 1.8% annual and get your money back. GICs are very safe.

Made an acquisition in the UK of a wealth management company for $1.2 billion. This is the way banks are going. It is no secret that the competition for the Canadian consumer’s mortgage dollar is tightening up and it’s not as profitable as it used to be. Instead of focusing more and more on spreads, you are going to see them focus on fees. (See Top Picks.)

This is 3^rd on his list of bank stocks. Likes the yield and Canadian banks in general. Have backed off in November into January, but subsequent to that they have been showing some signs of life. They are really a cornerstone of any investment portfolio and he believes they will continue to show good growth. Very low risk. (See Top Picks.)

(Top Pick Jan 18/13, 16.75% total return) He recommended selling further up. He liked it from the bottom. Never thought they would cut the dividend, but like TD it has one of the weaker ROEs.

Bought a Jan $68 Put Option. Do you ever Buy your Puts back and if a Put is put to you, do you take the stock and Sell a Covered Call on it? Depends on the capital that you have available for that particular position. This is a Short Put so basically you are taking on an obligation to Buy Bank of Montréal at $68 until the January expiration. You get a premium if the stock is below $68 and would have to buy it. You could then Sell a Covered Call against it.

US Assets are not that attractive. You make an extra couple of percent from one of the others.

Prefers Bank of Nova Scotia (BNS-T) because of their international diversification and their tight, tight credit and the Royal Bank (RY-T), which seems to be firing on all cylinders. This is an area where he is going to continue to hold his bank stocks. Would have no hesitation in buying banks.