Bank of Nova Scotia (BNS.TO)

This is a covered call strategy. Buy this at the current price and Sell April $62 Calls at $2 a share. This is a straight covered call on a bank stock. The six-month return if exercised is 9.46%. That means if the stock is called away next April at $62, you get 9.5% return including the dividend. The downside break-even on this position is $56.35 and there is a 5.63% six-month yield if the stock doesn’t do anything.

(Top Pick Oct 8/14, Down 9.82%) It is a function of concerns over the global economy and energy prices. It is still one of his favourite banks and he has been buying more of it at these levels. The longer term outlook is quite good. 4.6% yield and not bad to hold on to in the interim. Payout ratios on banks are not too bad at about 50%.

He thinks there is just too much pessimism going on in the banking sector. Valuation has just gotten ridiculous for the sector. The sector has outperformed basically forever. Trading at 10X earnings. Has a 4.66% dividend.

We made a new high since the financial crisis and then it came down with the correction. It has a pretty stiff yield to protect it. He sees no harm done and nothing wrong with it. He does not see a lot of upside, either. You could buy a basket of banks instead.

Having operations in 55 countries does not make it hard to value, but perhaps a little harder to manage the corporate culture. It offers investors that international exposure. They are relevant in the Caribbean but perhaps not in many of the other countries. He bought some.

(Top Pick Oct 20/14, Down 12.39%) it is unjustified. Banks make money in all kinds of ways, not just spreads.

Banks have been underperformers recently. You are likely to see some increases in loan loss positions coming up. You probably want to buy only on weakness. He prefers non-bank financials or US banks. All the banks are good investments long term. He prefers TD-T of the banks.

Whenever a bank falls 20% from its peak it is an excellent buying opportunity. Yields 4.8% with a history of increasing dividends. He is thinking of borrowing to invest in these types of companies. It has a good payout ratio.

(A Top Pick Oct 10/14. Down 11.25%.) We are in a somewhat artificial situation with the US guys Shorting our banks. They have done this before, and they were wrong. Recent numbers were okay. Dividend is good and the PE multiple is low. A relatively conservative company.

Canadian Banks have been under a fair amount of pressure in the last while because of a feeling they are going to be exposed to the energy sector. You could see loan losses as much as double if energy prices don’t perk up north of $50. Of the Canadian banks, Royal Bank (RY-T) has the least exposure. Scotia is the most international bank. With the International volatility, there have been some foreign-exchange issues. Doesn’t think you are going to go too far wrong with any of the Canadian banks. Dividend yield of 4.8%.

For all Canadian banks, the diversity of their businesses has balanced them out within the current environment. This one is no different, except that it has more international exposure, and their Canadian operations have more than made up for the weakness. Have one of the strongest capital bases in the banking industry. You are getting a little more ROE for a little bit less money. Dividend yield of 4.70%.

Likes the banks as a group. They have been terribly oversold. The PE relative to the TSX is the lowest it has ever been. This bank is not on his list, but if you are a long-term believer in emerging markets, this is one of the great Canadian plays.

Canadian Banks as a whole have suffered and are 8%-10% down. Great investments over the long-term. They are an oligopoly, pay a great dividend yield, and are not trading at high valuations. They are worthwhile owning here. You have to remember that they have built an international business, and that adds volatility to their earnings numbers and their business. Emerging markets are not the place to be, so this bank is not going to get the multiples for owning those assets. He thinks they will continue to buy more and more franchises in those areas. (See Top Picks.)

If you have a longer-term time frame, you could buy the banks now. He would wait until after the earnings; (Aug 25^TH) just to make sure that everything was good. You could really buy any of the banks and have great returns, but this would certainly rank up there with one of the ones he likes.

One of the better franchises. It has lagged its peer group over the last year or so. A lot of it had to do with where emerging markets in the International side of the business was. It was typically lower quality growth, mainly Caribbean. A well-managed firm. You have to be prepared to hold it for at least a year or 2, because there can be pressure on Canadian banks from international investors who are looking at the Canadian resource space and the housing sector.