Bank of Nova Scotia (BNS.TO)

A well-run bank and he likes what the new CEO is doing. He is being tough on the organization to make sure it is being run on a cost competitive basis, but he is operating in very difficult environments and they are going to stay difficult for the foreseeable future. Thinks the banks are good value, but could become even better value. They’re all trading at around 10%. This is yielding about 5.3% and he could see it yielding 6%.

For a long time this bank had a premium valuation. With their exposure to South America, which is largely dependent upon mining, that valuation has come off quite a bit. Their main exposure is in Mexico, Chile, Peru and Colombia, and the view is that their GDP growth is likely to be under 3% for the next year or so. However, they are gaining market share there. Efficiency ratio is fairly strong, so it is a profitable region for them. Trading at about 1.4 X Book. Dividend yield of 4.82%.

Canadian banks in general are very tied to the economy and natural resources. When you are making a bet on the banks, you are making a bet on the Canadian economy. He would say the outlook is mediocre. Chart is showing a series of weaker highs and weaker lows. There is a decent potential for the stock to rally to the top of the trend line in the short term. That is the good news, but he would not initiate a mid to long-term position, but maybe a short-term trade, but maybe not play them until things turn around.

His favourite of the banks. It is the most international of the Canadian banks. It did not expand to the US but to the Caribbean and South America as well as the rest of the world. This is a better bet for a longer term growth strategy.

(A Top Pick Feb 18/15. Down 9.5%.) Still likes this. It has been a little overdone in some of the negativity. The areas they are in are doing fine, other than Venezuela. Mexico in particular is doing quite well. They are quite careful about where they lend.

Not the cheapest, but is one of the cheaper. It has given a very short-term trading Sell, which ought to carry the stock down to about $47. There are concerns about their business strategy, particularly in the current environment. They are past Masters in dealing in the Caribbean and South America, so he thinks it will come through. Would prefer to buy it at $47.

Canadian banks are pretty good at these levels now. This has International and is tarred with the emerging markets, but 61% of its international holdings is in good parts such as Mexico.

Royal Bank (RY-T), Bank of Nova Scotia (BNS-T) or both, or should he wait? (His Top Pick is another bank that you must own!) Both these banks have big domestic retail and the cash from domestic retail gets reinvested into growth areas. This bank is reinvesting that money into retail, but it is offshore retail. A higher margin business, but more volatile than Canadian retail. He would do a half position on each, but wait.

Canadian Banks are a pretty safe place to be. Has avoided the sector over the last couple of years, but with the current economy there might be a better buying opportunity. This has underperformed most of the other banks because of significant operations in Latin America and Caribbean, which is under pressure. The dividend is more than secure. Also the Canadian banking sector is not very exposed to the energy sector in a significant way. For the 1^st time in a while, he is interested. He wouldn’t own one, but would probably own 3 including Royal (RY-T), Toronto Dominion (TD-T) and Bank of Nova Scotia (BNS-T).

If you are a trader, there are better places for your money. This and NA-T are the worst performing two in the space. This name will have a higher beta due to exposure to Latin America.

This could have been any of the Canadian banks, but this one was punished last year more than the others. Canadian banks move as a group up and down. This had poor performance on the downside last year. Generally speaking they often revert towards the means, and this one will have a better performance going forward. Big in Canada and Latin America.

(Top Pick Feb 4/2015, Down 7.87%) He still feels this is the best bank to own. The Canadian market is a low growth market. This one has been oversold on expectations from Latin America.

Nothing is going to trigger it to outperform. You are buying it for the long term. He prefers TD-T and RY-T to this one.

The worst performing bank in 2015. For 13 years in a row if you picked the worse of the 5 it is the best that year. Yield is just north of 5%.

Canadian Banks are not expensive. Have been hurt because the Canadian economy has been poor, and people forget that banks are a reflection of the macro economy of the country. This is quite leveraged to the oil business so you have to be careful about that. However, they all have great assets around them. You are not paying a lot for them. They may move sideways to down in the next couple of months, which would be a better buying opportunity.