Toronto-Dominion Bank (TD.TO)

BNS and TD have performed the best during his career. TD is well-managed and it expanded to the US at a good time, but loan opportunities in the US are not good. BNS has invested heavily in Latin America, and moving into digital banking with Tangerine. Latin American can offer upside, but is also risky. The overall bank industry faces concerns over loan losses during COVID--we'll see what happens. Markets will tend to fear over these losses, which he feels is overdone. This week, we'll see the data.

Tech and high-dividend payers are the most crowded parts of the market. Since the late-March bottom, any high-dividend payers has undeperformed. Utilities are really underperforming (but pay a yield) as are the banks. Where to go from here? This is a generational low in yields, which will, in coming years, will work their way higher. So pick your spots now: banks, like BAC and TD. There's near-term risk if COVID news doesn't get better which will increase insolvencies. He doesn't love the banks now, but he would pick TD.

Canadian bank for dividends? For a 10-15 year time horizon, the Canadian banks are a pocket of value. They are trading less than 10 times forward earnings, which already include loan loss provisions. They have high asset qualities. Buying here is a winning formula for the long term. The dividend will pay you to wait for the market to return to normal post-pandemic. TD, RY and BNS happen to be the ones he favors for his clients. They have exposure to international markets. BNS has the best valuation and the dividend yield is better than its peers.

It's a dominant player in Canadian commercial and personal banking. It has large, growing presence in banking along the US east coast that they will expand. TD has been consolidating US regional banks and will likely continue. The TD Ameritrade merger with Charles Schwab is pending but will create an online trading powerhouse that TD will have a stake in. TD has a strong wealth management business in Canada. Overall, the company is balanced and consistently grows their earnings 7% compounded in the past decade and grows their dividend. The Canadian bank oligopoly has outperformed the TSX in the last 19 of 25 years. (Analysts’ price target is $62.83)

Canadian Banks including TD-T and RY-T. He wishes we had earnings out of the banks because we are flying blind. It is hard to see anything positive out of then. The stocks have fallen a lot. His preferred is NA-T. It is hard to be materially bullish on the Banks unless you are a long term investor. He would not add more to positions, just hold.

TD vs RY? He owns both. For the near term he slightly favours RY. Both are core holdings for them. He likes RY as they have a larger capital marketing business. This will help them as the retail side will lag for the next while. Volatility in capital markets will help their results. TD Ameritrade is in a price war for commissions in the US. You could buy both, right here, right now.

Big 6 Canadian Banks? Their view has been for the past few years that the environment for banks was becoming challenged as interest rates moved towards zero. The upcoming recession will make things worse. He has holdings still with TD and RY. In Japan, where interest rates have been at zero for a long time, bank stocks there have not done well. He sees the same issue for banks in the US, but feels the Canadian banks will do a little better, but like sprinting the wind. Be cautious about being too overly exposed to any one bank.