Citigroup Inc. (C)

(A Top Pick Aug 11/16. Up 45.6%.) He likes the US financials. Also the Fed has indicated that they want to keep on boosting interest rates up.

All of the US financials stand to benefit from a rising rate environment as well as a relaxed regulatory environment. This is the one he would think is more accelerated to these new environments. You should have US banks in your portfolio.

If he had to pick one US bank right now, it would be this. The stock consolidated from December through May, broke out, had a nice little pull back, and then broke out again. This is very attractive for a number of reasons. It gets you exposure to global banking. They are taking market share, because they are well capitalized. You are going to get a significant capital return by way of share buybacks and increased dividends.

Trades at a little less than BV. He likes US banks, specifically some of the money centred banks like this one and J.P. Morgan (JPM-N). They are in very good shape and have lots of capital. They can increase dividends and buy back shares. It is the right environment to own these things, and you are not paying a lot for them. (See Top Picks.)

This is really a play on the US economy and a recovery in the financial sector. They’ve done various share consolidation, and the stock has done quite well. They are finally getting their house in order. Prefers Wells Fargo (WFC-N) whose yields are higher.

2 weeks ago, this bank increased its dividend by 100%, and thinks they could double it again within the next year. Look for more dividend increases down the road. He has just had a valuation high for this company. Assets divided by shareholders’ equity is only 8X. Compare that to the Royal Bank which is 16X. They could actually double the assets on their balance sheet with their current capital. His model price is $66.84, representing no real upside, but big potential for dividend increases. Dividend yield of 1%. (Analysts’ price target is $68.)

Over the intermediate-term, rising interest rates and a lighter regulatory environment should help a name like this. There is potential for large shareholder capital return, doubling of its quarterly cash dividend and announcing a massive $6.6 billion share buyback program. These things will push financial names higher. Because this is well diversified in Latin America and Asia, it is one of the more international banks. It is the cheapest name by far, among all the large cap names. Dividend yield of 1%. (Analysts’ price target is $66.)

(A Top Pick June 15/16. Up 54%.) He knew that sooner or later the Fed was going to do an about-face and start to tighten, which would help the banks.

Bank of America (BAC-N) or Citigroup (C-N)? The primary difference is that this is international and emerging-market focused. There are definite tailwinds to both of these.

This US bank has more international exposure, which is attractive with some of the international economies which are rebounding and growing more quickly than emerging markets. Also, trades at a valuation discount to it peer group. Trading at a discount to tangible book right now, at only about 11X earnings. Dividend yield of 1%, and there is a big opportunity for this to go up. (Analysts’ price target is $66.)

In the last 3 months, we have seen one by one, markets around the world lift off and start making new highs. This bank gets over 50% of its revenue from outside the US. They have $1.4 trillion in loans outstanding. Have a great credit card business. There is likely to be significant dividend and share buybacks announced in June of this year, because they now have enough capital to return 100% of their earnings back to shareholders. Dividend yield of 1.05%. (Analyst’s price target is $65.)

His favourite financial to own. The one bank that is still trading at a discount to its tangible BV. When trading at a discount to Book Value, the market expects your BV to erode, but since 2011, every single quarter, their BV has increased.

Bank of America (BAC-N) or Citigroup (C-N)? This gives you a little more international exposure and more investment banking. It comes down to where your comfort level is going to be. He would personally prefer J.P. Morgan (JPM-N), given that their investment banking arm is probably doing better than Goldman Sachs (GS-N) right now. The stock is fairly cheap on a relative basis.

US banks are performing well because the government wants to cut corporate tax rates, but also, very significantly for the banks, is that they want to roll back a lot of Dodd Frank and reduce regulations. That would allow banks to lever up again, and boost earnings. After the massive run ups most of the US banks have had, there is not going to be the same run for the next 12 months. However, they are in excellent shape and well capitalized as an industry to move forward.

They will benefit once interest rates start to go up. Historically they have not been a well run bank and continue not to be. There are better choices. Also, he prefers regional banks.