Goldman Sachs (GS)

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.

One of the preeminent investment bankers in the world right now. Making money on IPOs, bond issues, commercial banking, proprietary trading, etc. but not so much on bond trading right now. You are buying this at a very modest multiple of BV, much less than Canadian banks, and a fairly modest multiple of earnings. He expects the dividend to increase. Yield of 1.41%.

Has trouble valuing big banks with investment banks in them. What they earn on trading is way less than what they used to be. The most profitable part used to be the proprietary trading desk, but regulations made them get rid of this. He doesn’t find them as attractive as they used to be.

Viewed as best on the street in terms of investment banking. The problem is the regulatory glare is heavily focused on them. It is better to play the interest rate sensitive banks, probably offering more upside. He prefers regional banks.

Fits in the category of a very well run business. Trading at a reasonable valuation multiple. A pickup in merger and acquisition activity would benefit this company. He thinks this is going to happen.

(A Top Pick April 18/13. Up 18.63%.) A hard company to figure out. It’s complex. He saw that they were generating a reasonable amount of ROE and trading at below BV with a nice earnings growth profile. Thinks it is still way too cheap at this price. Could see it going to 2X BV. There is a lot more upside.

Great institution and are going to do very well. He prefers credit or retail banking. Steady fees is a low volatile way of playing a strong US consumer. Thinks there is a very strong M&A cycle and a very strong IPO cycle that is currently going on, which will probably last for years and years.

Currency is always a part of any international investment program. In the last while, it has been a benefit to own investments in the US because our Cdn$ has weakened. There is a feeling that it is going to weaken even further. It makes a lot of sense to have exposure to other economies.

Great company. This and Morgan Stanley (JPM-N) are going to do very well over the next little while. They are not expensive. Have cut their costs way down. A lot of these companies are flush with cash so there is going to be more M&A that is going to go one. Trading at 11X estimated earnings, which is not expensive.

Trading at about 110% of Book. In this case, Book Value is a really good indicator of valuation and he feels they could trade at 1.5X book, which would take them well over $200. However, some confidence in the boardroom is needed and that is to do more mergers and acquisitions, which he thinks will come. 2014 may be the year.

(A Top Pick Nov 21/12. Up 40.49%.) Still trading at only about 1X Book. In previous cycles, it has gotten up to 2X Book. Not saying it is going to do that, but feels it still has room to go.