Royal Bank (RY.TO)

He has 11%-12% total shareholder return over the next 3-5 years. This is estimating what the dividend growth and capital gains will be. Has it with the highest PE of any of the Canadian banks which he feels deserves it.

A very high quality financial institution for a long-term investor. Very well run. Pays a nice dividend. If you are going to Buy and Hold it for a long time, you are not going to go too far wrong. Feels the US banks overall are cheaper on a valuation standpoint and have more earning potential than Canadian banks. Canadian banks are trading between 11 and 13 times earnings while US banks generally trade at 10X and have a better earnings growth profile because they are recovering from a lower base and a big improvement in housing.

He is anticipating a pickup in M&A activity with a shift from bonds to stocks. This tends to be very good, especially for a company like this with their large wealth management component. From 2012 to the present, the chart has had a nice uptrend. It was a consolidation level around the $60 and $70 levels, but it is breaking out. Use $70 as a Stop. He can see this going to $80. Yield of 3.87%.

(A Top Pick April 9/13. Up 26.66%.) Has a nice mix of business. Banks are trading at about 11 or 12 times forward earnings. Earnings growth is going to be in the high single digits so she thinks they can grow their share price at that level. Recently increased their dividends by about 6%.

A great story going forward. 50% in the non-interest spread business. Came off a little recently because of some allegations of mess-ups in the states so now is the time to buy them.

Canadian banks are quasi-monopolies so you have to have them as Canadians. This one is the largest. He questions its exposure into the world of capital markets, where they have been very, very strong. They continue to do well in this area. Has a great yield and nice growth ahead. A classic core holding that you never really sell. This is one of the top banks in his list.

Caller asked about pairs trade. You cold short BNS and long RY because of Latin American exposure. He would go long a US bank and short a Canadian bank as a pairs trade.

Canadian Banks. Last year they ran well. They became compressed in the spring time because of housing market concerns. We are in the seasonal period for banks and next week is ‘bank week’ when earnings come out. There is still a lot of talk about houses being overvalued. Banks trade off that sentiment to some extent. It put in a couple of small bottoms and is now breaking through so this is a positive sign. Watch it does not roll over.

In the long run Canadian banks have been excellent investments and probably will be. Right now he prefers banks outside of Canada. The biggest driver in Canadian bank earnings has been the consumer. Consumers leverage themselves up in the mortgage business and he feels this has pretty much gone as far as it is going to go. However, US and European banks, which got hit very hard in the financial crisis, are now growing their earnings and dividends faster than Canadian banks. For a long-term investor, this is a great investment.

Wonderful run. RY is the big capital markets bank. Thinks it will split soon.

Any of the banks are difficult to analyze these days. Each bank has its pro and con. This one is a very safe holding. Thinks they are fairly valued now but they are not cheap. There are better stocks out there in terms of finding growth and growth in dividends, but it is a safe Buy at this stage.

Banks. In general have done well. An uptrend and then a pause during last year then an up leg again. These stocks need a pause or pullback right now. The worst thing you can do is get out now. After a dip it will go up fast.

Their strength is in the breadth of their platform. Their businesses are really strong domestically but you could also argue they are a global leader. High single digit earnings growth plus dividend should get you 10% return. You might want to wait for their earnings release.

All the Canadian banks are pretty good. This still has pretty low PE’s relative to the group. Still have a lot of dividend growth. You are seeing stock splits and potential for more. Canadian housing market is not falling apart. Likes this bank’s capital market exposure.

Closed at $71.21 and he has a model price of $74.30, a 4% upside. If it pulled back to something like $67, that would be a great opportunity to Buy. This and the Toronto Dominion (TD-T) are the most highly valued banks on the Canadian market but are actually doing better than the other banks in terms of performance.