Bank of Nova Scotia (BNS.TO)

Canadian banks in general hold good value, but the trading environment surrounding the banks is very negative. The worry is the implication for the weak commodity price. What happens if people start losing their jobs in Calgary and what happens if real estate falls? While that is not that material on aggregate, it weighs on sentiment, particularly American sentiment.

Stock vs. Stock. TD-T vs. BNS-T. Both are great banks and you can hold both. TD-T is the most expensive of the group right now. BNS-T is at 9.5 times next year’s earnings and he has not seen it this low since the crisis. He would prefer BNS-T, which has sold off because of its commodity exposure in Latin America. However, the economies are doing fine down there.

Exposure in Latin America. He has not been a big fan of Canadian banks for their Canadian exposure. He sees Canadian housing as not being cheep and sensitive to rising interest rates. He prefers TD-T for the US footprint and RY-T for the wholesale footprint.

(A Top Pick Nov 3/14. Down 7.63%.) Not a huge fan of the Canadian banking sector. This is the only one he owns. Likes this because it has the smallest Canadian footprint. The International part is more emerging markets of central and South America and Asia, which he likes.

There is a reversion to the mean trade in banks. BNS-T has lagged due to concern over emerging markets. They have struggled there. It is slow, but it is turning now.

Although he doesn’t love the Canadian banking space, from January until now this stock is down about 8%. In 2014 they were down about 10%. Although the brand is strong and the dividend is safe, quietly their share price has trickled down 20% in the last 2 years. A name that you can buy and not worry about. Dividend yield of 4.62%.

Feels this bank has better growth prospects than any of the other Canadian banks, simply because it is in markets that are somewhat underserved. This is in Latin America, Southeast Asia and Thailand and has huge growth prospects from emerging middle class citizens. Right now it is suffering from a strong US$. Ultimately this is a great place to be.

Historically, bank stocks have a very strong period of seasonal strength right now, usually from around the end of August right through until the end of November. This is when banks report their 4^th quarter results. However, that has been the end of the seasonal strength for the banks. It looks like this will continue to go higher until the end of this month. If you own, continue to Hold but look at the opportunity to take some good profits. Look for short term technical indicators as you get close to the period of seasonal strength.

(A Top Pick Nov 21/14. Down 11.99%.) Has been adding to some of his positions. Likes the longer-term outlook. This is being affected by having a lot of exposure to South America, which is where they have been the most punished. Feels that has been overdone. You can buy this close to 1.5X BV now and it is yielding 4.8%. A good long term position to have at this point.

He doesn’t hold any of the banks. This bank’s business is much more international than the others. With issues in Brazil and Latin America, it got hurt a little bit more than others. The banks are trading at 10.5X earnings with decent returns on equities.

He likes the name. This summer he has been adding to his Canadian financial positions because of the downward performance on the Canadian banks. The dividend yields are compelling. An attractive place to invest for the short term right now.

Bank of Nova Scotia (BNS-T) or Bank of Montréal (BMO-T)? Has no preference of one over the other. Characteristics are slightly different. If you have sufficient assets, you should hold both.

He likes it. It has been one of the underperformers in the space because they have exposure to commodity reliant economies like Canada and South America. In South America there could be more loan losses. He is underweight in the space. Hold it, but look at what other exposure you have to Canadian banks. Over time you will be fine with this stock.

Banks are tough. They were down over the last few months and have come up a bit. It will not go over $68. There is not a lot of upside. Get it at $56 and it is a trade.

The Canadian banks are very sound. Digitally based financial companies will be a small competition for them. They now own Tangerine anyway. It would take a lot for a bank to cut a dividend. It is pretty safe.