Goldman Sachs (GS)

It is probably the best investment bank in the world, and they passed their stress test so they could increase their dividend. He also expects share buy backs. Buying back shares when at book value is a very good use of capital.

If looking to invest in this bank, you really have to ask yourself “what is the exposure that I want to achieve?”. Some US banks have exposure to the retail consumer, and this one would not fit. Very heavily dependent on merger and acquisition and wealth management. He prefers to play the consumer in the US. You could do this through Bank of America (BAC-N) or Wells Fargo (WFC-N). He prefers to play this through regional banks such as National PA Bancshares (NPBC-Q), as not all regions in the US are recovering at the same pace. (See Top Picks.)

(A Top Pick Jan 2/14. Up 6.07%.) Trading right around Book, so it is slowly coming back. Have moved their ROE from mid-single digits into low double digits, so he thinks they have opportunity for expansion of their multiple. It also has its opportunity for organic growth.

This is slowly, but surely going private. They are buying back shares hand over fist. They plan to buy back 15% of the stock over the next year or so. They are also increasing the dividend. They keep surprising Wall Street in terms of earnings, and are not getting a fair multiple for this.

Primarily a capital markets driven company. If you are positive on the US capital markets activity, IPOs, restructuring, etc. this would be a Buy. This is more volatile than some of the larger banks there. She has gone with Wells Fargo (WFC-N) that has less capital market exposure and more diversified lending as well as lower volatility and a more attractive dividend yield.

(Top Pick Oct 21/13, Up 11.53%) Recommended on the premise that it would do a lot of investment banking and proprietary trading and that it could raise dividends. They did all that. It is 1.25 times book value.

3% drop in the stock is fine for a company that has a highly levered balance sheet. It is obviously best in breed in terms of the banking space. This is a money centered banks, so it is very firmly focused in terms of regulation, bank changes, etc. which means that every time there is a sneeze in the market, the regulators are going to be dealing a lot with banks like this. He prefers US regional banks, which don’t have the same regulatory glare.

A company that has been hurt like others in the banking space by low rates and bond prices. But there has been much more volatility in the last few months and that benefits them. They are an investment banker and confidence will lead to deals and they are the preeminent deal maker in investment banking.

(A Top Pick Sept 25/13. Up 16.28%.) As we get further and further away from 2008-2009, these stocks remain very, very cheap, historically speaking. As they come out of that morass, he feels they are going to float steadily higher. Still a Hold.

(A Top Pick Oct 31/13. Up 16.71%.) As the premier investment bank globally, this made a lot of money taking companies public. At this price, you are buying the company at around BV. They will have the scope to increase their dividend once the federal authorities are convinced that their Tier 1 Capital is high enough.

Financial stocks tend to do well in the first 4 months of the year, but this one is a bit different. It can do well in the summer, June until about right now. Chart shows a huge run-up in the stock. The trend is favourable right now but we are reaching the end of the seasonal strength and we are liable to enter a period of seasonal weakness, which stretches through to November. If you own, he would suggest taking profits now. Seasonal strength is January through to April.

This is not a pure bank, but is an investment bank. Got tarred and feathered in the 08-09 crises. Was trading at that time at about 2X BV. Currently trading at about 1.1-1.2 times Book Value and is pretty attractive.

One of the largest investment banks in the US. He is very bullish on banking in general, but feels investment banking is a very good ROE business. Lots of pressure on the capital side for these companies, but this one trades at 1.1X Book, and he could see it trading at 1.5X Book. Has a great franchise in the asset management business.

(Top Pick Jun 19/13, Up 5.30%) M&A is the premise here. They lost their proprietary trading operations for the most part. They are struggling with trading issues. He is looking for them to build their ROEs back into the high teens.

(A Top Pick April 18/13. Up 16.48%.) A lovely investment bank and they are doing all the right things. Cheap valuation and he thinks it is worth $250 a share.