Bank of Nova Scotia (BNS.TO)

They have a new CEO, took a write-off. They got a multiple for being in high growth areas, but some of those countries are slowing down. They are doing the right thing now and it will benefit them down the road.

Recently announced some cutbacks and puts some negative attention on them. It means they are not sitting by and letting payrolls build.

Relative valuation has taken a bit of a hit lately, because in their recent quarter they reported a bit of a hiccup in their international operations. It is fairly rare that you are able to buy this bank for a lower Price to Book valuation than its competitors. At current levels, it’s a pretty good place to be. In the meantime, you are being paid 3.8% dividend yield and that dividend is likely to go up in the coming years. Tier 1 capital of about 10.9%.

Just pick one of the banks and hold it. BNS-T is his preferred. It is on sale because of its operations in the Caribbean. The dividend is safe here.

Last results were a bit lumpier than people were hoping for. New CEO is probably putting his stamp on a number of things. Given that there were some job cuts, the big potential worry for him would be on the Latin American side, is that a one-off or will it be dragging into the future. Given the yield, valuation is very compelling, compared to the other banks. He would like to wait another quarter.

Cutting 1500 jobs. That always disturbs him when he sees a very profitable company chopping jobs, possibly for shorter-term reasons. This is a great franchise like all Canadian banks, plus they have their operations in Latin America and the Caribbean. They seem to have run into some issues in some of those places. Canadian banking sector is the most expensive globally on a price to book valuation. Dividend is rock solid. In a strong financial condition. He wouldn't look at this unless there was a pullback.

The only Canadian bank he owns. It has the smallest domestic footprint. They are big in emerging markets and are strong going forward. 3.87% dividend.

A good time to be looking at Canadian banks. They have all sold off from their peaks. All took a nosedive from the mini meltdown a couple of weeks ago. Not his favourite. (See Top Picks.)

Bank of Nova Scotia (BNS-T) or Bank of America (BAC-N)? By owning a Canadian bank like this, you can take advantage of the Canadian dividend tax credit, which basically means a lot. Secondly, if you are going to buy something in the US, you are paying up for it, and that implies a potential exchange risk down the way. This is a great way of playing the Canadian economy as well as emerging markets.

A laggard. It is difficult for Canadian banks to grow so each has its strategy. It is in Mexico, Chili and others. ROE is very high and dividend is attractive.

(A Top Pick October 17/13. Up 12.5%.) This gives you a 4% yield with a growing dividend profile. More international than the other Canadian banks. Long-term he expects you will see a ton of growth from those areas.

Since 1974 the compound return on banks has been 17%. A remarkable place to be. There has never been a 10 year period where you have not doubled your money in Canadian banks. They have a license to print money. There is absolutely no competition. Canadian economy is going to grow at 1%-2%, while the US economy is going to grow at 2%-3%.

The interesting thing about Canadian financial institutions is that the valuation ranges are not that wide. You have to remember that they are the one outside of Canada with holdings in Latin America and emerging markets. He prefers Toronto Dominion (TD-T), which trades at about the same valuation, but with a little faster earnings growth. There is nothing wrong with this.

This gotten beaten up a little bit more than the other banks recently. Feels there is too much concern about their earnings in central and south America. He still sees them as economically doing quite well. A conservative bank. Yield of 3.87%.

This is the most diversified international Canadian bank. They have operations in the Caribbean, South and Central America. Has always been a very well managed bank from a credit perspective. All of the banks have pulled back a little. 3.9% yield. Thinks earnings over the next couple of years are going to go over $6 a share. This is at a very reasonable price and he is expecting 10X future earnings in a couple of years.