Citigroup Inc. (C)

Diversified financial that has taken a bit of hit recently. You are looking for expanding short interest margin. There have been very significant deposit inflows. There are a net inflow of demand deposits recently. They have no cost to the bank. You want to see some tax and regulatory reform.

Over the medium term, the shares can and should benefit from rising interest rates, a lighter regulatory environment, as well as a general recovering economy. There is potential for a large capital return back to shareholders. In November, they announced $1.7 billion share buyback instead of dividends. It is very diversified globally speaking, and will benefit from emerging markets like Latin America as well as Asia. Trading at a very cheap valuation in the group. Dividend yield of 1.07%. (Analysts price target is $65.)

The sell-off is an opportunity to buy. He is bullish on the US banks.

All the banks have had a great run since the Trump election, partly premised on deregulation. Dodd-Franks has been a burden, so deregulation will be good for them. If the regulatory burden gets less, they would then have a lot of excess capital, which could potentially be returned to shareholder by dividends and buybacks. Compared to Canadian banks, this is still very cheap, especially on Book Value. This one is very exposed to international markets, and Mexico comes to mind. On balance, it is probably a good one to get into, preferably after a pullback after its very strong run.

(A Top Pick Feb 17/16. Up 55%.) The economy has been improving and that has been to the benefit of the banks.

Financials is definitely his favourite space at this point going forward. With rising interest rates, and presumably a lighter regulatory environment, this is poised to do well. Given that they have slightly underperformed some of the other banks, he thinks their potential for large capital returns through dividends and stock buybacks is great for shareholders. Trading at about .83X Price to book ratio, which is a definite discount to all the names in that large bank space in the US. Dividend yield of 1.05%. (Analysts’ price target is $65.)

(Top Pick Dec 9/16, Down 0.3%) He was expecting them to move up, but he still likes it.

Financials are his favourite. This is his favourite large cap finance and has been for some time. It is trending at a discount to its book value. Stick it away for the long term and don’t follow it on a daily basis.

He loves US banks. These banks are way overcapitalized. They were levered 19 times previously and are only just under 8 times here. They have a massive amount of capital to use in loans or return to shareholders. Dividends are peanuts. His model price is $66.23, a 15% upside. (Analysts’ target: $64.43).

He likes it. Finally conditions are coming together to let them break out into higher ground. They have good upside, and a lot of it.

This has done well and is still cheap. One of the more international players. Dividend yield of 1.06%. (Analysts’ price target is $63.96.)

US banks have not done anything for three years or more. 2009 was a low, but long term they have been trading sideways. Since election night a lot of these stocks have literally come alive. His model price is $66.61, or an 8.5% upside, but he would ignore that. The dividend has been severely repressed. He sees them substantially increasing them. (Analysts’ Target: $63.07).

Bank of America (BAC-N) or Citigroup (C-N)? He prefers Bank of America because they have done a very good job of exiting low margin businesses. Also, they have a very strong retail franchise in the US.

This and BAC-N are both great companies. Of all the money center banks these are the ones that got into the most trouble during the financial crisis.

To add to his TD holdings?The biggest risk most investors make is concentration risk, having all your eggs in one basket. Since you already own Toronto Dominion, there is absolutely no reason to buy another US bank. He would suggest you look at FirstCash (FCFS-N) instead.