Bank of Nova Scotia (BNS.TO)

This bank has viewed itself as more international, especially in the emerging markets. However, they are not always the leader in that area. Because of those countries, this bank has the opportunity to be a higher growth company, but the issue they face is that it is much more volatile. Not expensive, and you get the benefit if emerging markets turn around.

For the banking sector in Canada, the important thing to remember is that it is a very limited competition market. 5 big players and a few smaller ones, and that lends itself to good returns for investors over time. Banks are something you want to own and average into. This bank has been the hardest hit over the last 1-1.5 years because of its exposure to oil and gas loans. Because of this, it may be on sale relative to the other banks, and this is the one he has been adding to in the last year, more aggressively than the others.

(Market Call Minute.)

It has busted out of the downtrend. Basically it now looks pretty good. However, he would prefer another bank because BNS has high exposure to resources.

This bank is 50% international and 50% Canadian. It had lagged last year, but has been the best performer this year so far. The international in the last quarter was pretty good.

(A Top Pick May 26/15. Up 4.83%.) The only Canadian bank he owns. He doesn’t have big exposure in Canadian banks. The outlook for writing off loans is getting worse. He worries about real estate, oil/gas exposure. There are better growth opportunities outside of Canadian banks.

It is fine for the long term, as are the other Canadian banks. He always liked their Latin American business. They are unusual amongst the 5 banks.

(A Top Pick July 16/15. Up 5.88%.) Has been a little challenged this year. Took a big hit on their loan portfolio this quarter, and management has indicated that that is probably the peak of their loan problems. There will still be loan loss provisions coming out into 2017 for all the banks.

Bank of Nova Scotia (BNS-T) or TD (TD-T) and FinTech competition? Everybody is competing with FinTech these days and all the banks have issues. A lot of FinTech’s advantage is that they are not really regulated at this stage and can do a lot of things regular banks cannot do. Banks are taking measures including cutting costs, introducing new technology, etc. It is still early stage. The choice between these 2 banks is that TD has better exposure and this one has better International exposure. At this point he thinks TD is winning out with a steadier economy.

Have had a very good recent quarter. He likes the diversification. Have an international footprint, but have lost the premium that they tend to trade at relative to the other banks. That is usually a good time to be looking at banks. Inevitably in the cycle it is going to come back again. Likes the strong focus they are putting on cost and expense control. 4.4% dividend yield.

BNS-T vs. NA-T. Totally different. BNS-T is a global bank leaning toward the Caribbean. NA-T is not the same thing. This environment is constructive for developed markets with energy prices staying stable. He prefers more North American exposure so chooses NA-T. He would prefer RY-T to either of these.

This name has too high of a short interest. They have a high exposure to emerging markets. The energy book is well contained compared to peers. It has a 4.4% dividend that will grow over time.

Longer-term valuations are still pretty solid for all of the Canadian banks. Trading at about 11X earnings with a yield of 4%+. A good addition to your portfolio.

What do you think of having a global diversification with an emphasis on growing within the countries where they already operate? This is the international bank in Canada and he likes it. This strategy makes sense, because if you already have your logistics set up it makes sense to consolidate. The bulk of their operations are in the Western Hemisphere, which gives them the opportunity to get more growth.

Model price $74, 16% upside. He thinks it goes to $72.40 first so would nibble here.