Toronto-Dominion Bank (TD.TO)

She owns both. RY has far outperformed TD. RY remains her top Canadian bank. Likes the HSBC acquisition and its wealthy client base, integration has gone well. Though it's outperformed, still her preference.

We don't yet know what ultimate penalties in US will be for TD, its capital base can handle it. There may be a cap imposed on growth. Trading below 9x forward PE, lagged YOY. Stock price already reflecting the bad news. She'll continue to own. Substantial operations in Canada and outside US. Targeting immigration to Canada.

Broke down through support, mirroring support from 2019; the older the support, the less it matters. Could rally to around $80, and it would still be a sell. If it doesn't find some legs really soon, it's going to $60. He doesn't have faith.

He has only 2% exposure to banks.

In 2002, shares fell from $44 to $20 because they were stuck with $2 billion in writedowns from the Enron lending (and implosion). He bought more at $20, and the following year, shares hit $45. So, the money-laundering charges TD faces in his opinion are political grandstanding. Only 2 TD employees in different states allegedly opened accounts for money launderers, not systemic. In Europe, 10-15 years European banks were scrutinized for allegedly helping Russian oligarchs. TD pays a 5.5% dividend and shares will be stuck until there's a resolution/settlement of some sort. Wait and see. He isn't buying this now.

The ugly is the issue with money laundering, which stemmed from lax internal controls, will end up paying a nasty fine. Should have reasonable growth after that. Things will return to normal in a few years, and you'll own a rock-solid company. Two years ago, it was the best bank in Canada.

Will be blocked from making acquisitions for a while, which could preclude management's overpaying for something. Hefty dividend. Remains a spectacular retail bank. Always take the long view.

Solid balance sheet. Canadian retail banking generates 60% of revenues, US retail 25%. Expectations have increased for amount of the money-laundering fine, shareholders need to be patient. Cowan was a successful acquisition. Opening new US branches. 

He's holding through the storm. TD is in the penalty box, but the PE is very attraction. He would add at these levels. TD can rectify its current issues; they have the highest tier-one capital of all of the Big 5 banks. They can weather any storm then buyback shares. Their performance in the US has not been super, but it is in Canada

Take the bigger picture view. TD makes $14B in profit a year. So whether the fine is $2B or $4B, it's in a position to get through this. Remember that over the last 100 years, you never went wrong buying a Big 5 Canadian bank stock that was beaten down because of trouble. They always come back with a 100% success rate. Pays you a 5.5% yield while you wait.

Even the CEO mentioned it could get worse before it gets better. Don't buy a full position now, but you could start one.

She'd pick this one right now, trades at discount of 9x forward PE. She's owned for many years as a core holding and is sticking with it until she can assess growth potential in the US. No one knows exactly what the penalty will be. An asset cap would be almost worse than a penalty. 

It is still a Canadian bank, very profitable, increasing business from immigration, and with only 1/3 of revenues from US.

Sold TD in a heartbeat the minute he caught a whiff of the money-laundering issues, as this might bar further acquisitions which would really stunt growth. He invested in BMO and RY instead. 

Banks have gone sideways for a long time, though you get your 4% yield. His goal is to do better than that. The financial services he likes the most are growing much faster than any of the Canadian banks, with dividends that aren't much below that of the banks.

Though his preferences may be deemed volatile and riskier, there's also the risk of non-performance. TD is fine, but not a lot of growth. See his Top Picks.

Look elsewhere. The outcome of their problems is unknown. Look what happened to Wells Fargo, which took years to recover. But we don't know the outcome yet.

Issues such as money laundering. Will most likely remain in the penalty box for a while. It'll take a couple of quarters of good results and no headaches for the stock price to recapture where it was. Still a high-quality bank and business. Anytime there are issues, stockholders get concerned and some are going to head for the exit. Will be fine to own over the next couple of years. If you bought today, he wouldn't be surprised if price went down or sideways.

Not a huge fan of the banks right now, unless you're looking for income. Wait a month or two, and perhaps we'll see a bit of a rebound so you could make some capital growth on top of the dividend.

Prefers the telcos to the banks. In telcos, there's not much growth, but these stocks are undervalued. He picks Telus. TD: if there's no more bad news coming, this is probably a buy, but many investors are sitting and waiting. TD is likely undervalued to other banks, but wait 3 months to see how their overhand shakes out.

Problems not done, but mostly built in at these levels. Don't know amount of pecuniary damages. Spending $600M to enhance systems. Outlook for banks in 2024 not great, picks up in 2025. Trades at discount, nice dividend. More of a buy than a sell.