Goldman Sachs (GS)

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.

IPO market has been pretty hot lately. This is now a commercial bank but, at heart, it is still an investment banking and trading firm. Investment banking is about 15% of their revenue, but has the potential to be much higher. There is a big pipeline of IPO offerings, probably the biggest since 2006.

Split? They used to split to make it easier for small investors to get in but that doesn’t matter now. Trading at 1.9 times book but not getting the results on their equity that allow for them to have this multiple. The confidence is not there.

Went into the Dow on a fairly modest valuation, which he finds intriguing. There is an ongoing recovery in the US banks. This has one of the smartest managements going. Yield of 1.23%.

This one bothers him a little bit. He has never been trustful of what they do with their balance sheets.

Has suffered off its previous 2008 highs but in the last year it has done very well. Recovering along with a lot of the banks. We still haven’t hit a capital markets cycle, which is unusual. Usually capital markets cycle and the M&A cycle is coincidental with the success of the market move. It will happen but not yet. This bank will be a prime recipient when it does.