Citigroup Inc. (C)

Has liked this for a long time. It has had an enormous run over the last 6 months, along with the entire US banking Centre. Only trading at about tangible BV, but still at a discount to the other larger cap US banks. Management has done a very, very good job of keeping the company focused, by shedding underperforming international and domestic assets. Their balance sheet is rock solid. They passed the US Fed stress test the last 2 years, and are returning cash to shareholders. In a rising interest rate environment with a healthy balance sheet and the potential for Trump to deregulate the banking system somewhat, this is a great play.

Trading below Book, which is $65, so you have some upside. Trading at a very low multiple. Had a great run lately, but thinks it goes much higher. It is into a multi-year turnaround story. CEO is one of the best. This is going to be an increasingly ROC story. You are attaching it at exactly the right time, where rates are going higher, growth is returning to the market, and you may have less of a regulatory overburden which had just killed the banks. Dividend yield of 1.15%. (Analysts’ price target is $58.26.)

Wells Fargo (WFC-N) or Citigroup (C-N)? He prefers this one. Wells Fargo problems have been dealt with, but they are not going to go away in a hurry. The brand and the consumer sentiment has been hurt, and is going to hurt them a lot longer than most people are recognizing.

Looking at a 30-year chart the stock went from $50 to $50 and peaked out at $500. What is going to be interesting to watch are the “good banks-bad banks” components to see whether or not there is going to be some recovery, and whether ultimately or not that is going to lead to higher returns on a go forward basis. He thinks there is upside here, but we are going to need to see more details once we see higher rates. It is pretty good value here.

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.