Toronto-Dominion Bank (TD.TO)

Outlook is favourable. He owns BMO, RY, and TD. All 3 had good earnings, with TD probably the best. But the other two were also strong.

Tight, well-regulated oligopoly. A need, not a want. Diversified by geography and line of business. Good line of sight through the cycle to high, single-digit rate of dividend growth. He's overweight the banks.

Concern on this name was asset cap in the US. Last quarter it was 10% under the cap, leaving some really good room for growth in the US. Models 10% growth. Trading at a pricier PE than peers, but reasonable.

He wouldn't buy before earnings. Let the stock breathe a bit.

Shows what sentiment can do to a stock. Multiple expansion has really driven the total return. Right now, multiple's too rich for new clients. He has trimmed, just to maintain the proper weight in portfolios. Constructive longer term on earnings growth, though won't be as strong as we've just seen. 

Demonstrates how focusing on both earnings growth and the multiple can lead to a really robust return.

Still owns as a core position, took partial profits. At the time of the pick, it was (relatively speaking) a bit of a dark horse due to the money laundering penalties. Investors like its plans for growing both earnings and dividends.

Kudos to management. Financials did very well last year, and TD recovered along with them. Trading at high end of valuation range. Canadian economy did better than expected, defaults on personal mortgages not as bad. Interest rates have come down, US economy doing fine. 

He doesn't like owning companies with "handcuffs" on them, such as no growth in the US. But he's bullish on the Canadian economy, so you have to own financials.

Her owns both. He doesn't wait for pullbacks. A year ago, he favoured TD because of the penalty imposed on them.  RY is trading at a full multiple, while TD is at a slight discount. He slightly favours TD. Also consider the other Canadian banks.

It is one of three Canadian banks they own. There have been problems in the past with money laundering but they have sold off some non-core assets and focused on Canada. They are trading now at 14 X and growing earnings at 6%. They're also buying back stock. She has trimmed a bit but still holds and thinks they are well positioned.

The issue they had in the US is definitely behind them. The Canadian banks have had a big run-up and are a bit ahead of themselves. Interest rates are a little toppy. It is time to take a little money off the table but it is a great company.

Phenomenal run. Not as attractive as it was at $70-80. PE is probably ~14x, which is on the upper end for a bank in the Canadian market. It, as well as peers, are probably at all-time-high valuations on pretty reasonable fundamentals.

Surprised it did as well as it did with the cloud of the money laundering fallout in the background. There's only so much they can grow in Canada, especially with our population shrinking

Appeal used to be its US growth, but that advantage has faded a bit. Regulatory issues and strategic missteps have shifted its focus from growth to damage control -- might be behind it now. Doesn't stack up to a JPM, for example. Already at target price, wait for a healthy pullback to add.

She owns RY instead.

He owns no Canadian banks, because he owns only founder-run/owned businesses. Also, returns on invested capital are around only 12-15%, though consistent. TD and RY are the top two banks. TD is up 71% this year. He doesn't know what the shares will do in the future, but look at their PEs and compare it to the historic norm to determine when to buy or add shares. Or just DRIP shares.

He's going to pull the lens back, as he likes to look at things from a macro perspective. In 2020, we went from falling interest rates for 40 years to what is likely rising long-term interest rates for the next 25-30 years. That benefits banks in particular.

If you look at the XLF in the US, after going nowhere from 2008-2021, it finally made a new high. Beginning of a new long-term bull market that probably goes on 10-12 years. During that time, earnings go up and so do dividends. The multiple expands.

TD's had a wonderful year this year. So have the US banks, and he's used JPM as a Top Pick many times. This year, the European banks joined in. 95% of global banks are trading above a rising 200-day MA. Don't be afraid of a bull market. These are dividend growth stocks, and when there's inflation a rising stream of income is pretty attractive to offset the rising cost of living. TD looks great.

Under new CEO, cleaning up past errors in US. Progress under new CEO is impressive, and market's recognizing that. 

Strategy to grow at high single-digit pace is credible; with the dividend you get a good line of sight to a low double-digit total shareholder return. Trimmed not that long ago. Should be a core part of a well-diversified NA portfolio, especially as a dividend grower. Unlikely to repeat this year's performance in 2026.

A perfect example of what can happen -- when sentiment turns on a name, there tends to be a pile-on. People can't hold it, and there's a lot of indiscriminate selling, the index rebalances, and there's even more selling. Result is that the valuation just gets annihilated. 

To get a return like this on an income name seems, to him, very weird. But you have to take these opportunities when they come. Earnings have rebounded and the multiple has re-rated. He has trimmed for some clients, but still holds and is quite constructive.