Opinions
Jim McGovern
Toronto Dominion
TD-T
COMMENT
Jun 05, 2017
Stock price when the opinion was issued
You might be interested:
It has had a good jump from last fall and the upside now is pretty gradual with the earnings upside in the last quarter being pretty flat. It is upgrading what they have and re-investing into higher yield products for better portfolios. Upside could start next October close to the fiscal year end.
Held up fairly well all things considered, as money's rotated out of large-cap financials. Support is around $74 with the December retest. Bumping up against resistance close to $86. That's the range, and we're waiting to see if it goes through. Financials have started to struggle, so this could go either way.
The big banks face challenges, because the homes bought during Covid, when interest rates were rock-bottom, are and will pay much higher rates. TD is very tied to home mortgages, so be careful. Also, they're restricted from growing their business in the US for 4-5 years. He sold it, because the future didn't look great. He bought more Royal instead.
Likes TD a lot. Very undervalued at 10x PE. Potential for multiple to rerate in medium term. More upside as it distances itself from the overhang of regulatory infractions. All that should give you a better total return. He'd pick TD.
For BAC, even with deregulation in US, the big banks are already so large, it's hard to imagine they'd be allowed to get even bigger.
Like a lot of Canadian banks, it has US operations, which would probably be the one area he would be most excited about, in part because the US banks find themselves in a better environment than they do in Canada. Thinks there will be legislation changes in the US, which favours bank shares in general. The flipside is the constant buzz on the Canadian real estate market. This bank operates in the prime mortgage market. Doesn’t think you’re going to make a lot of money in any of the Canadian banks right now. He would much rather focus on banks internationally rather than domestically.