Toronto-Dominion Bank (TD.TO)

Compliance issues persist in US -- can't open new branches, can't make acquisitions until the Fed gives it the green light. Big runup due to banking sector tailwinds. Unless we really get higher inflation and interest rates rising, he imagines banks in Canada will continue to grow, though not at the pace of last year. 

Avoids the Canadian banks now, because valuations are too high vs. historical norms. Also, the credit cycle hasn't run its course, which is a risk and could impact earnings.

If you've held for years, no reason to sell today. He's not a buyer here, mostly fully priced. Fears of US growth are largely behind them. Real questions involve Canadian consumer and whether housing market comes back to life (engine of growth and profitability).

Canadian banks have run up so much it is time to trim and re-position portfolio sizes. Its assets in the US have been capped but TD has optimized their assets there. Ideally he would like the cap on US assets taken off so they can build up their retail operations there. It is lagging its peers in commercial banking in Canada.

Don't buy now. Not buying any of the Canadian banks -- problem is valuation. Trading 14x forward PE, 2.2x book value, 3.5% yield. He just can't pay these sorts of valuations. 

Other areas of the market are more beaten up, so look there.

It's complicated. Canadian bank stocks are pretty rich compared to US, trading at higher multiples to book value. Yes, paid the financial penalty, but still paying in terms of ability to grow in the US (and those problems will persist a while).

Remember how WFC was in purgatory for a long time, and this is a Canadian bank. Could be caught up in CUSMA negotiations. If you need a Canadian bank, look at BNS or RY.

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.