Bank of Nova Scotia (BNS.TO)

He would take a long term position, but in the next 2-4 months banks will be lower than here.

We just came off a period of seasonal strength from October through to December. Had a tremendous run and then broke that trend. Chart shows it has developed a double top, which is typical of all Canadian financials right now. Next period of seasonal strength would be from the end of January through to April. He is more in favour of US financials right now.

Very well run bank. You want to own it for two reasons. When we are headed into a tough environment in lending, which we are not right now, and two, when you want to benefit from growth in South America, which right now they are not. In the short run that exposure is hurting them. In a decent market you want to own what people want to own today. Prefers US banks.

(A Top Pick Dec 13/12. Up 15.6%.) Caribbean is definitely not doing well as tourism really hasn’t recovered. Other Central American countries are doing okay. Still likes their ability to be in faster growing markets than Canada.

(Market Call Minute.) Had a nice run, so maybe wait for a nice pullback. If you own it, own it for life.

He is a big holder of bank stocks in Canada. BNS is probably the best one with the best track record growing outside of Canada. He sees rising dividend, well run institution.

Preferred Q recently reset from 4.95% to 3.61%. Price dropped to $24.65 and all of a sudden, it is above $25 at 3.61%. Why? These recently came out in 2008, with this brand-new structure with a reset rate, in this case 1.7%-2% over Canada bonds.. Canada bond yields fell so these got reset at much lower rates. Market had thought the banks were going to call them anyways. Capital treatment of these has started to decline so a Call is more likely. When investors actually looked at the relative value compared to GICs or bank deposit notes, they are pretty cheap so started to buy them again.

If interest rates and tapering happen in the US, with this bank’s exposure to emerging markets would they be affected? The potential negative on tapering is that they have a lot of emerging-market exposure. To the extent that the market perceives that tapering is bad for emerging-market growth that could be a potential negative. She is quite constructive on the outlook for the global economy. Latest readings on PMI are getting quite positive and she would expect, outside of the 1^st quarter where there is noise with a debt ceiling and budget debates, that into the back half of the year you are going to see the US and global economy start to accelerate, which will be quite positive for this bank.

Wouldn’t want to be jumping into banks with 2 feet at this time. Stocks have had a very good run. This one has the benefit of being in the international segment and there is some benefit to that in terms of emerging markets which have come down. Canadian housing market is still a very prominent feature of the banks.

Chances of a share split are unlikely. He has a target $69 on this.

Thinks this is early for this bank to be thinking and talking about a share split. He would expect it will be 3-4 years out before this happens. This had been his trading favourite in the last 3-4 months because it was lagging a little bit. This last little run up has made up a fair bit of the deficit. This would still be his 2^nd or 3^rd favourite.

Financials are clearly sector leaders. Because several of the sectors that got hit in the market are not well represented, financials are carrying even at bigger part of the burden for Canadian investors. Cdn banks are performing remarkably well and for the 1^st time in about 18 months they are outperforming the US banks over the last 3 months. Their long-term strategy is very good. The only credit market that is having a tougher time are some of the South American countries where a lot of corporate debt was issued in US$ and as their currencies are having trouble, that raises a little bit of risk. Generally, the long-term strategy is good.

What is your assessment of the impact of new leadership on a large corporation like this? He is not a believer in the “great man” theory of corporate management, particularly for an organization as big as this one where there are multiple layers of management spread across 4 continents. The impact of a CEO is felt over time. It becomes a matter of setting a direction and setting his style. He would not buy a company based on a change at the top. He is comfortable with their strategy of being the most international of the Canadian banks.

Is there any more value in any of the Canadian banks and which would be a fair one? Feels there is more opportunity outside of Canada. Canadian banks are relatively fully valued. Likes the international scope of this one but fears it will run into a sharp object in South America at some point. If that happens, that will be the time to add this.

Likes the names where you know the dividends will grow, 8-9% in this case. Underperformed the others year to date but is turning around now. Have the most international exposure of the Canadian banks.