JP Morgan Chase & Co (JPM)

Likes the US banks. It comes down to how you want to capture that exposure. Some are heavy on the retail consumer and some are quite heavy on the investment banking side. This one is about half retail banking, a quarter investment banking and a quarter wealth, so you are getting somewhat of a balanced approach. He is more bullish on the retail banking side and has played this through regional banks, such as Columbia Banking System (COLB-Q), National Penn (NPBC-Q) and City Holding (CHCO-Q).

This has taken some time to start to move up, but with the US housing recovery in motion, the improving labour market and lower energy prices, these are positive developments for banks. With interest rates eventually moving up, at some point later on this year or next, Net Interest Margins should improve. Legal issues are still there, but the bigger parts are behind us. Trading at 10X forward PE, which is below historical averages.

A great company. He thinks it is not expensive, 9 times earnings, around book value and has a decent dividend yield. The net interest margin has been hurt over the last little while. It has also been hurt by some fixed income business. They did well on equities and M & A. You are not paying a lot and the US economy is doing better, so it should help JPM-N. It is a very large asset management bank as well as having a credit card business. There are a lot of issues with regulation. But he thinks they are good value here.

J.P. Morgan (JPM-N) or Bank of America (BAC-N)? He is more familiar with J.P. Morgan, so that would be the one he would pick. If you are looking out 2-3 years, by all means this would be the one.

Right now is a good time to be in the US financials. They are undervalued and are starting to perform well. Technically it is right at the high that was set back earlier in the year. The seasonal period would run from mid-December into mid April. This looks good.

Wells Fargo (WFC-N) or J.P. Morgan (JPM-N)? A lot of the small mid-cap oil companies have heavy exposure, from a banking point of view, along refined (?) equity issues. Not sure of the concentration for the oil exposure, but given the run-up we have had globally, he would think that everything from the A&P companies to the pipelines, etc. will have impacts. Historically Wells Fargo has been considered to have the best risk management culture. This showed up during the banking blow-up, as they didn’t have to take the money. This bank was considered to be #2. Both are quite good. Wells Fargo is more of a consumer driven story where this one is a banking driven story. He would rather chase the regional trade, because there is still a lot of regulatory glare been exposed to the money centred banks. Of the 2, he would favour Wells Fargo.

This gives you the double edge of a super regional bank exposed to the average person and a pretty good investment bank. Thinks the investment banking cycle is about to start, which involves M&A, new issues and an IPO market as the US market continues to take leadership and the bull market is extended out. When that happens, brokers make a lot of money. Yield of 2.57%.

This is showing a series of higher highs and higher lows, so technicals are looking decent. There were some issues with government rules and legislation, and that will still overhang the stock. The stock is breaking out into the $60s which is great news. Well-managed. Probably getting close to being overbought, but we are getting to a pretty strong seasonal side to the calendar.

Likes the whole US banking industry. Particularly thinks this one is an incredibly well-run franchise. Great retail, investment banking and great asset management. Feels it has really performed quite well.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? She would favour Wells Fargo because it is the one that she owns. This one is more capital market sensitive, so if you are really bullish on markets and financing, perhaps you could get more upside with it. When she looks at banks, she looks at their sustainable ROE’s and ROAs and Wells Fargo is the less volatile of the 2.

Relative strength on this stock is good. It is going have some resistance at the old highs and it is just coming up on that now at $60. Its trend is intact. He would not hesitate to buy if you are long term.

Positive M&A cycle, positive capital markets cycle. Companies are trying to transform themselves through the investment banking side using high yield and equity markets to do it. These guys are well placed to do it. It is not very expensive.

US financials are being held back by regulation and low interest rates. Buying back stock, great balance sheet. Earnings potential well beyond $6 next year.

(A Top Pick Sept 5/13. Up 17.81%.) Still likes the name. With the recovering US economy, housing market getting better and the capital markets getting better, this stock should continue to do well. Regulatory issues are still hampering a lot of these large cap US banks. This is trading at just around Book Value, as well as 10X forward PE, which are both cheap. 2.7% yield, which he expects to grow by about 8% a year over the next 3 years or so.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? Two very good, but different companies. This one is much more leveraged to the capital market side of things whereas Wells Fargo is primarily a super-regional bank, much more housing market and mortgage driven. His preference is Wells Fargo because of his view on the US housing market where the recovery is only about halfway through. Both could be a good choice.