National Bank of Canada (NA.TO)

A well-run bank. It always has the highest dividend yield and trades at the lowest valuation. Has always generated an ROE that has been comparable to the other banks. Why it trades at a discount is beyond him. If you have a five-year view, this bank will serve you very well.

He used to own it. It is 100% in Canada with no foreign operations. He prefers more international operations. At some point it will run into big headwinds.

Just reported terrific numbers, and expects significant target prices to go up from here. This deserves to trade at a market multiple comparable to the other banks. The CEO has done an excellent job rebounding from a number of blunders. They are in great shape. Took a big, big provision against oil/gas loan losses, and now may be able to write some of that back. In the meantime, their capital ratios are now perfectly in line with the other banks, ready to either buy back a lot of stocks, increase the dividend significantly, and maybe even start to grow their US division. He can see it moving up to the $65-$70 range. Dividend yield of 3.95%. (Analysts’ price target is $58.)

Like most banks, this has rallied quite a bit. They delivered excellent underlying operations. Thinks it will continue executing well. Well positioned and pretty defensive. Many people expected write-downs, which has not happened. Overall, the banking sector has rallied too much, so maybe it is time to take some profits off the table.

Over the last 52 weeks, this has gone north of 50%. However, that is not going to happen over the next 52 weeks. If you are OK with that, that is a good starting point. The dividend is safe. The challenge is that they are very much Canada centric, and in fact, very much Québec centric. If you are willing to hold over the long-term because you like the dividend, you will be fine.

His preferred names would be Toronto Dominion (TD-T), J.P. Morgan (JP-N) and the Royal Bank (RY-T). Has a little more appetite for US exposure. He likes the shape of the yield curve in the US and expects Net Interest Margins to expand. There is nothing wrong with owning this, and it will give you a lot of torque to the upside, especially if the energy market improves.

Like all Canadian banks, this is very well-run. It has the highest yield of around 4%, which he likes. Trades at a slight discount to the others which it traditionally does. They have a good capital markets business. Doesn’t have a lot of exposure outside of Canada. Feels all the banks have had pretty good runs. If he were to buy one bank right now, it would probably be this one.

This tends to get labelled as a regional bank because it has a strong Québec presence. Thinks the regulatory rollback that is likely to occur in the US will favour some of our banks, some more so than others. He would tend to favour the larger and more diversified Canadian banks, such as Bank of Nova Scotia (BNS-T) which has a large presence in Latin America, TD (TD-T) and Royal (RY-T) that are very active in the US.

The key advantage is its dominance in Quebec. They keep getting market share in Ontario. They have great presence in rural areas in Quebec. They have a strong capital market business that has delivered very stable earnings in the last few years. The market has not paid sufficient multiple for this. They are reluctant to make investment outside of Canada. Hopefully they focus on capital markets this year.

Sell? All the Canadian banks have run up. This one and Scotia (BNS-T) have really run up, partially because they lagged last year. It’s not a bad idea to lock in some profits here. First of all, look at what percentage financials are represented as part of your overall portfolio. He holds about 15%. These are names you can hold and not have to worry about selling. The trouble with selling this is, where do you go with the money. You get a good yield and some safety. If you are not overweight, there might not be a need to sell.

Feels the banks have upside from here. This one is energy focused as well as Québec focused, and feels it has some pretty good growth numbers.

Laurentian Bank (LB-T) or National Bank (NA-T)? Both are Québec based banks, and tend to trade at a discount historically to the sector. This one is the larger bank, and tends to have more of a higher risk asset mix in terms of lending and international ventures, but also has higher growth. The hope in the shorter term is more of a cyclical leverage, especially to the oil patch, and some of the International investments.

Pare back on profits? Just came out with some very good numbers. His concern with is that they were one of the best lenders. They had a pretty good spread of loans in Alberta which ended up being a significant negative. We are basically through the problem period, and they may be able to improve their write down potential. Looking like it has more upside, and this is not the time to pare back.

(A Top Pick Nov 4/15. Up 21.92%.) Had expected that there would be a recovery, and when you can get a 5% dividend, he felt it was a good one to own. 4.4% dividend yield is better than the average Canadian bank.

(Top Pick Nov 4/15, Up 12.36%) They did a new issue after doing an acquisition. It was a buying opportunity. He has been happy with it.