Citigroup Inc. (C)

It has been through the mill over the last decade. They have great management, which he likes. They trade at extremely low valuations of 70% of tangible value. They can become more profitable. And rising interest rates and a steepening rate curve will benefit them even at a 1% rate increase.

(A Top Pick Sept 30/15. Down 3.63%.) The banks have basically gone sideways looking for that catalyst, which is a steeper yield curve. They are getting out of the doghouse with the regulators, and are allowed to pay a higher dividend. The stock is very, very cheap, trading at less than 80% of tangible BV. This is a “Buy and wait and you will be rewarded” type of story.

This is more exposed to the emerging-markets. Based on his view on potential growth going forward, this one would be in the good camp if you had to pick a bank. They’ve been under pressure with the emerging-market pullbacks, but the bigger risk for them is in the political side. Both US candidates seem to be pretty stuck on pushing the banks further.

Set of three THEME picks: Between now and a year from now, the Fed will support the US until the election. He thinks they will not follow Japan and buy up half the S&P 500. The Fed wants to raise interest rates. When we get past the election he thinks the Fed will become more realistic and interest rates will start heading up. C-N happens to be very, very cheap. G-T has probably been one of the poorer performing gold stocks. It is just a nice cheap income stock. Telus is a nice income stock. Things are going well for the company.

(A Top Pick June 16/15. Down 22.07%.) The market is questioning the balance sheet. It looked like the Fed was ready to move on rates. Feels you should have a bit of this along with Citigroup (C-N) in case things turn around positively. It is hard to recommend it here.

Trading at 64% of tangible book, which gives some downside protection. When a stock is trading on a valuation basis as inexpensively as this one is, it does provide you some comfort that you can stick it out for the longer-term and you are not going to fall too far. Dividend yield of 0.48%.

The US financials is the only sector in the US that has not made any money. This has been frustrating. It is not unreasonable that it can probably crawl back very slowly. Probably a Hold.

For the most part, financials have moved in direct correlation with interest rates. As interest rates go down, stock prices go down as well. Feels interest rates have found a bit of a bottom, and he doesn’t see much upside. There will be a cap on all financials due to interest rates. If we can’t get back above 2% on the 10-year bond, that is going to put a cap on them. You want to be in the best of the best when they do take off. There is nothing wrong with owning this, he just thinks there are better stocks out there.

(Top Pick Jun 4/15, Down 14.58%) Got stopped out and got out of financials last year. This group looks quite attractive right now. This one gives you global exposure.

He prefers a US bank that is more retail focused, such as Wells Fargo (WFC-N), or one that has capital market exposure, such as J.P. Morgan (JPM-N).

A lot like BAC-N commented on in the same show. Many retail investors don’t have the time or interest to look at all the regional banks. It has been tough to make money on this one since the recovery started. The dividend is not overly attractive. There are better places for the capital.

Banks in the US are much better capitalized today than they were many years ago. Thinks there is value in various parts of the US financial sector, whether its a small niche bank or something like US Bancorps (USB-N). A lot of money is still being spent on cleaning up past messes. They have much better capital ratios now.

Citigroup (C-N) or Bank of America (BAC-N)? Of all the big banks, these are the most opposite, Bank of America been much more locally focused and Citi has a big contingent of emerging markets. With both, a lot of things are going right in their domestic franchise. They are struggling with all the things everybody else is struggling with. Where this might have a bit of an advantage right now is that emerging markets seem to be turning. From that perspective, he really likes it.

(Top Pick Apr 9/15, Down 19.38%) A lot of its growth came from outside the US and that has now hurt it. Long term he likes the name.

Citigroup (C-N) or Wells Fargo (WFC-N)? There are very large differences between these 2. This one has a lot of exposure to emerging markets, which he is not keen on. Also there is a lot of fixed income trading.