Stockchase Opinions

Peter Arender, CFA Toronto Dominion TD-T DON'T BUY Apr 21, 2004

Closer to the price that we would be selling at, not buying. By historical standards, this is the level where banks tend to top out. Fully valued.
$44.980

Stock price when the opinion was issued

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HOLD

With the money laundering scandal, she trimmed. Still has US operations, so will benefit from capital markets activity. Can focus on its Canadian operations. Kept it because of its very attractive valuation and yield. Can still grow in other areas; US retail represents only 25% of earnings. Very strong balance sheet, can use it to buy back stock.

Unspecified

The issue was in the U.S. resulting in a big fine but that is now out of the way. TD now has an opportunity to get rid of businesses not giving a good rate of return and an opportunity to do a better job than other banks. It has more exposure to the retail side. Also volatility helps investment banking. TD is under the microscope.

COMMENT

Beat today, strong capital markets, strong trading especially in the US. Shrinking balance sheet to comply with US regulators. Earnings estimates for all banks have come up a lot. All banks will go higher if no tariffs and our economy stays good, though TD will probably participate least. In the penalty box.

If tariffs go on and stay on, credit loss provisions will go up quite a bit. Only buy if you feel tariffs aren't going to happen.

BUY

Canadian personal and commercial businesses are excellent and dominant. US business is a fixer-upper, and they will. Wholesale business is subject to the vagaries of the capital markets. Wealth management is quite good. Watch DIY investing, as it seems to be doubling down on growth aspirations. Liked the Schwab sale; using proceeds to buy back shares. Dark clouds are finally parting.

DON'T BUY

Issues with money laundering. Stock price has started to recover, but yet to regain its lustre. He'd rather own the best-quality banks, which are RY and NA.

HOLD

Just moved up off the bottom of a very long-term channel. Long way to go to get back to usual high. Still under both Canadian and US regulatory scrutiny. Very well run, aside from a nasty US stumble. Quality and value will come through.

Unspecified

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.

BUY

Turned the page on money-laundering fine, but the fix won't be overnight. Likes the excess capital on the books. Applauds its plans for share buybacks, focus on capital markets, and strengthening its Canadian franchise. #1 discount brokerage platform in Canada.

HOLD

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.

WEAK BUY

Issues in US last year, and growth is probably capped there. Strong Canadian branch presence with consistent earnings and growth. Still have to see new management performance. Increased costs due to compliance and risk assessment procedures. Stock's done well, still some room to go.