JP Morgan Chase & Co (JPM)

Longer term you will do very well. Right now they have a big bulls-eye on them. Full of turmoil. They are a senior bank and quite safe. When economy gets legs under it they will do well. Between now and then he is not sure how volatile they will be. Hold it in balance but pare back if you have too much.

Likes the name. With the tapering talk, the financials became weak, but this is your premier large gap investment, wholesale banking name. Strong earnings.

Has a huge derivatives book and there is no disclosure on this. Does that bother you? Has harped about derivatives and their problems for years. He thinks they should change the whole marketplace. Regulators should clamp way down on it.

It is the best US bank and getting better. Continue to take market share.

Model price is $65.11, an 18% upside. You have to love US money.

(A Top Pick July 31/12. Up 50.69%.) Had thought that the market had overreacted on the London/Wale (?) thing and he knew the US economy was going to improve and it was a great entry point. Still cheap because the earnings keep growing at 20% a year. He can see this going to $75.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? The longer-term view on US banks is, for the last 30 years, one of cyclicality. If you catch the trades right, US banks are very, very good. This one had a good risk culture but Wells Fargo had a better one. The big challenge for the money center banks is that they are going to have the strong glare of the regulatory lights. You will definitely get upside gains from recovers of unemployment, people taking loans, health recovery, etc. Feels regional banks will offer you more upside. (See top picks.)

Likes this. Probably his favourite equity investment. The company has turned the corner and its balance sheet is going to look a lot different going forward than it did in the past. Well managed company.

All of the banks are challenged by loan growth and getting the net interest margin up. This one probably has more safety but more limited opportunities. At this point, with the pricing and valuations in the banks, he would probably gravitate towards Citibank (C-N). If you’re looking for mortgage exposure, J.P. Morgan or Wells Fargo (WFC-N) might be your choices.

We are close to the May intraday high in the S&P. This one has a test of that high. If we do break through he doesn’t see a lot of upside before the next correction. Don’t chase it. It will be a chopping market this summer.

Really knocked numbers out of the park. The interesting thing is that the stock actually closed negative. This is telling you that a big part of this bank is investment banking and trading. Going forward, with what is happening with interest rates, the potential for debt origination and proprietary trading capital markets business are going to be lower. Thinks there is a lot of underlying risk. The shine of the Steady Eddie earnings grower over a longer period of time, is going away from the banker. There are a lot of questions on the raising of capital ratios and how they calculate those ratios. This is a bank that needs to feed off capital markets and he sees it kind of range bound in this area from here. He prefers Wells Fargo (WFC-N).

US banks versus Canadian banks? If you have a group of companies that are fundamentally sound but are seeing net improvements from the margin like the US banks are seeing, and you compare them to a group likes the Canadian banks, relatively more expensive but the margins are seeing slowdowns, Canadian banks are likely to see contraction in the multiples and he feels you can get expansion in the multiples in US banks. This one was able to dance through the damage without getting winged too badly so their management group should have pretty strong credibility and probably should have a multiple that is higher than the group. Yield is about 3% and there hasn’t been a lot of dividend increases because the Fed has held all of them back.

Likes the US banks a lot and this is a big granddaddy of them all. Their core business is very solid. Investment banking is rebounding. Net interest margins are beginning to rise. Housing market is doing well. Only trading at 9X PE, which is a huge discount to its historical norm.

You have to own a US bank in your portfolio. Valuation is quite attractive. This is one sector that will benefit from rising interest rates. Meanwhile, it is benefiting from the US housing recovery. Still cheap. Thinks it could trade well into the $60-$70 range over the next year or so, on an improving outlook on the US economy.

Probably the most senior of US banks. Pretty healthy, but like all of them, it is in a position where they are making their money through cost cutting. That is not a great reason to own a company. The opportunity with the banks is if the net interest margins start to expand. Banks are starting to hit his screens.