Canadian Imperial Bank of Commerce (CM.TO)

Turnaround story looks real. Traded at a discount for years, now catering to the middle class consumer. Possibly more near-term upside due to valuation.

After a good run last year, banks have had a bit of a pullback. This one has a weird propensity to do something dumb (another technical term ;) and shoot itself in the foot more than the others.

His favourite is RY.

We're speculating what will happen. Last year, most of the Canadian area was protected from tariffs because of CUSMA. The US would be paying more for our goods through tariffs; they buy many of our goods. Banks are at the tail end of their elevated provisions and their stocks have done quite well as interest rates have declined. The Bank of Canada has signalled it may hold rates for a while, but the government has released more fiscal support and opening more trade channels, which are good. She remains bullish banks.

You could add to this one here. 

Whole Canadian banking sector is fully valued, trading effectively at record highs on valuation. Not time to load up. Time to take some profits and invest in more defensive names, as Canadian economy is on a more fragile footing than other parts of the world.

The new infrastructure projects that Ottawa has announced will benefit the banks. NA is more Canadian than CIBC, though both are. Big projects need a lot of funding, and the banks' job is to find that capital. CM is pretty well priced now.

Prefers this one and remaining peers today to RY, just on valuation. Though RY is the best bank in Canada, this name trades at a far better multiple.

Canadian bank stocks have been trading at their highest valuations that he can recall in 30 years. The Canadian/Mexican/U.S. trade agreement is coming up for renewal next year. Will the Trump administration extend the terms or not. This is an important question. Could be time to take profits.

The chart shows a V-shaped recovery since April's tariff worries. In Canada, interest rates have been cut aggressively, so the Canadian banks have skated through. Wealth management divisions are strong. Loan loss provisions are down. NA and RY are the best, but CM and BMO are reporting much better earnings, which catches his attention.