Citigroup Inc. (C)

This is probably the bank that is best positioned right now. Their asset quality has been improving. They have been focusing on their credit card business. As the rates go higher they make money on the float. 50% of revenue comes from outside the US. It is inexpensive compared to its peers. Thinks he will get good dividend growth. There are a lot of drivers for this stock.

(Market Call Minute.) Cheap and looks awfully good. It has to break through about $60. It has tremendous potential.

Regarding the US recovery in the last 5 years, the main sector that has not been participating is the housing recovery. Expects this stems a lot from when housing had the big crash 5 years ago, so it is a sort of reluctant recovery that is going on. He is looking for the yield curve to steepen this year. The housing and job recovery has gone on long enough now that this sector in the economy is really going to start to go. Yield of 0.7%.

Big US banks would be one of the safer places to be in the US. You will probably start to see dividends start or increase with the US banks. Investment banks have done better than banking banks. He thinks this one could do fairly well.

Very undervalued. Stock hasn’t done much getting through all the regulatory issues that are happening. A lot of those regulatory and regulatory costs are behind them. This is on track of its long-term goal of strengthening its global presence. In consumer and corporate lending they are divesting out of a lot of things that they don’t want to be in. Going to return very meaningful levels of their capital to shareholders, whether through share buybacks or dividend increases. Last year they signed a deal with Costco Wholesale (COST-Q) to issue credit cards, which he expects will be a big revenue kick for their credit card division. Trading at a pretty big discount to its peer group. Yield of 0.8%.

It is going to get a kick in the pants and get moving here. This is a multi-year trade for income markets. We are going to see a tremendous amount of capital fed back to investors here. He was impressed with how they have tried to fix their problem assets. They will do well in a rising rate environment. A decent way to play it.

A challenged bank, of all the US banks they are doing the poorest. The asset base is the poorest. He would look for someone else to buy.

CEO is doing a good job and concentrating the bank on core efficiencies. They are getting out of a lot of countries and out of risk areas. They go through another stress test in March, and he is quite hopeful they will be allowed to increase their dividend and their buyback. Relatively cheap on a variety of metrics. Trading at about 10X earnings compared to the average bank that is trading at about 13X. Also, trading at about 90% of tangible book value compared to the average bank of 163%. Yield of 0.08%.

This Is his least favourite of the US banks. They really didn’t do the reform coming out of 2008. They were slow to do it. They hung onto legacy businesses. They have a lot of international exposure and this is the thing that he is cautious on. He likes American banks in general.

He sees the greatest opportunity in the US financials in the consumer. The best way to play that is through regional banks. Since 2008 this bank, like the other US banks, has made specific efforts to become more conservative, so they divested of their more risky assets. (See Top Picks.)

(Top Pick Jan 14/14, Down 3.68%) They have a strong month and then they go backwards. They are spinning their wheels. They seem to be fined for something every day. You have to be market weight financials. Does not know when the FED will allow them increase dividend.

(A Top Pick Dec 9/13. Up 4.44%.) This remains a top holding for him. Can see this ultimately as a $65 stock. They have applied to the Fed with a capital plan, which he thinks they get approved in March. That will be huge, because they can start returning the vast majority of their cash flow to investors, in the form of share buybacks, special dividends and dividends.

(A Top Pick Jan 14/14. Up 1.26%.) Coming out of his EBV -3 line in his strategy of “coming out of the blue”. Has $1.9 trillion of assets while Bank of America (BAC-N) has $2 trillion of assets. For the banks that were the most hit in the 2008 crisis, their balance sheets are starting to get to be okay. When they start to perform and use that capital, that tells you that the US is really coming along and getting out of the financial crisis. Yield of 0.07%.

(A Top Pick Nov 15/13. Up 7.34%.) For US financials, he thinks the best is yet to come. They are cheap. They are levered to an improving global economy. Have the whole housing cycle in front of them. You want to own US financials.

(A Top Pick Nov 7/13. Up to 12.43%.) Cheap. Trading at an 8.5X forward earnings multiple, versus the historical 55 year multiple of 15.5 times. Thinks they’re going to get their capital plan finally approved in March, which will allow for quite a bit of that cash flow to come back in the form of a dividend.