Royal Bank (RY.TO)

Still likes the banks. They have done well and have outperformed the TSX in general last year. All the banks can grow earnings at 6%-8% and will grow their dividends at a similar pace. Of the group, this has one of the highest ROE’s so it trades at a higher price to book, but that is fully warranted given its higher sustainable ROE. Very diversified business mix in terms of retail and commercial banking. Wealth management will do very well with the rise in equity markets. Dividend yield of 3.76%.

He is not a fan of trying to pick banks. Eventually they all do well. Buy the ZEB-T ETF. Yields are roughly the same.

Don’t bet against Canadian banks in the long run. They are a little expensive right here, however. He would favour banks with operations that have more foreign operations. BNS is his preference.

He has been a supporter of the banks right through the bad times earlier this year when people were Shorting, on concerns of real estate. He did not believe them and still does not. He is looking for a 5% capital gain on the banks with this one at about 6% for the next 12 months. Yield is 3%-4%, giving you a 10%-11% real return. (See Top Picks.)

Banks have certainly had a good run here. Trading at a slight premium to the group. Expects there will be strong retail numbers out of them and their capital numbers will be solid. Not sure she would rush into buy it here but in the long-term it is a good play.

Banking sector finds seasonal strength from August all the way through to December. Has a bit of a rough patch in December with earnings coming out at the beginning of the month. You probably want to avoid this at this time. The bank stocks are priced to perfection. There is another period of seasonal strength into the 1^st and 2^nd quarters, from January all the way through to March and April. If you own, consider taking your profits before the earnings come out.

Which Canadian bank would you recommend? In his private client business, he owns the Royal (RY-T) and Toronto Dominion (TD-T). He thinks these are the 2 best banks in Canada with the best opportunities. They’ve done incredibly well and he thinks it will continue to do well. Not expensive. You get a great yield and thinks you will get an increase in the payout ratio for these companies. There is a great opportunity for them to trade at higher multiples than they are currently. More than half their revenue comes from the US now.

There is a lot of money flowing into the financial space again, probably because of the Short covering by a lot of international investors after their concerns about a Canadian housing crisis.

Chart shows a strong uptrend channel. Basically whenever you look at a chart like this, it is in an uptrend, and you don’t argue with it. The banks as well as a lot of stocks are a little overbought. There may be a pullback as the price may be approaching the top of the trend channel and he would probably add if it dropped to the bottom of the trend channel.

(Market call minute.) Hard to fight against bank momentums of this size. Pays a great dividend.

Has not been adding to his holdings recently. Canadian banks are relatively inexpensive right now. Earnings are starting to turn back up. You have big US Short sellers that are starting to cover, which is pushing the stocks higher. (See Top Picks.)

Not a good time seasonally at the moment. But this one is still in an uptrend. Stick with an uptrend when you have one. Usually best starting October of each year.

(Market Call Minute.) Likes this but it is at its 52-week high so Buy on weakness.

All banks are reasonably valued now. Royal has now run up so he would look at others. Today you are getting almost 4% and they have captured some of the discount from a year or so ago. Would not add to position.

Where would you buy this stock, through Canada or the US? Doesn’t think there is any particular advantage. You might even find yourself at a disadvantage from a tax point of view if you held it in the US.