Toronto-Dominion Bank (TD.TO)

He is very positive. It has been his core bank holding for some time. The exposure to the US has been the main reason. About 50% of revenues come from the US. They will take a hit on next year’s earnings due to tax changes but then they will get a 20 or 30 cents benefit a quarter from their business. This still has a lot of legs.

(A Top Pick Jan 3/17, Up 17%) It is 50% US and Canadian retail is really starting to kick in. They will take a hit in the upcoming quarter in the US and then have ongoing 2-3% higher earnings going forward on the tax cuts.

The banking industry in Canada is an oligopoly, a very well governed, regulated and profitable one. The banks have outperformed the TSX in the last 18 of 25 years. This is one of the best of the pack. It has a great franchise in the US. Has a strong wealth management franchise. A good buy and hold candidate.

There are no Canadian banks he is interested in. They've had a phenomenal run. He can see how people might want to buy into the Preferreds. An area he is looking at more and more are preferred shares, as a defensive option. At some point, markets are going to get hit badly, and preferreds are a good place to go, especially if you can buy them under the issue price.

Long-term investors who have just held Canadian banks have made out like bandits. They’ve compounded rates of double digits and dividend growth, and he doesn't see that ending. Canadian banks should trade at more than 13X earnings. The overall market is trading at 19X earnings. He likes Canadian banks and feels you should overweight them in your portfolio.

Financials are part of the pro-growth theme. They like rising rates as it helps their spreads. Also, Canadian banks have a seasonality weakness from mid December to the end of January. However, seasonality is not all it is cracked up to be. We are currently in an uptrend, and the 1st resistance he would look for is $75. If it starts having issues around $75, that would be a good time to sell half.

He prefers US banks. It cut back who could get seniors discounts recently. As the demographic ages, they are not the ones without money and so don’t need a seniors’ discount. Most people stay with their bank.

Traditionally, Canadian bank stocks do very well right through until the reporting of 4th quarter results, the last week in November and the 1st week in December. After that, this one has a history of underperforming. Right now, the stock is struggling, hitting its head against its all-time high. As you get close to the end of the year, the bank stocks have a history of underperforming right through until March. If you are a trader, you probably want to take some profits between now and the end of the year. If you are a longer-term investor, a bank is a bank and you are going to do okay.

When writing a covered call, how do you determine the expiry date and the strike price? When he does covered calls, he has a specific goal in mind. He wants to generate tax advantage cash flow for investors. They are not looking for growth at this point. If that is your key element, then covered calls make a lot of sense. This is probably one of those banks you have probably been disappointed in, as the stock price has run through the strike price 2 or 3 times. It would have been called away and you would've missed some of the upside. He is looking 2 to 4 months out and tends to look at an option that is slightly out of the money if he is very bullish on the stock. If he is not very bullish, he'll look at an “at the money” option, because it’s the one that is most liquid, has the highest open interest and is priced most efficiently.

Has been a fan of this bank, particularly with their US expansion, but was disappointed, thinking the US side was not throwing off the kind of returns he originally expected. Recently, the numbers on the Canadian side were indifferent, but very good on the US side. This is a way to buy into the US market. (Analysts' price target is $70.50.)

His principle holdings are Royal (RY-T), Bank of Nova Scotia (BNS-T) and CIBC (CM-T). TD has made a foray into the US and is doing very well, but it is taking a lot of capital to develop that. It’s a long-term payback to current shareholders when companies are on very large forays creating a position in US markets. an extremely competitive market. Recent results on US retail, where not quite up to what people were hoping for. Overall though, they've done extremely well in positioning themselves.

She likes Canadian banks as a group. This one has good exposure in the US. The banks have just finished reporting the 4th quarter and pretty much all came in online. Have all been increasing their dividend in the mid-single digit range, and she expects them to continue. Going forward, this will be a call on both the US and Canadian economies. This is a good environment for the banks.

(A Top Pick Jan 5/17. Up 11%.) He likes this bank because of their US operations. They will probably benefit more if interest rates go up faster in the US than they do in Canada.

His upside target is at about $76-$77. When he buys banks, he likes to buy the cheapest. If you own this it would be a Hold. However, if buying a bank, this would not necessarily be the one he would choose.

This bank gives you a huge deposit base in the US. They have an under leveraged deposit base, so they can issue a lot more loans. However, there are still household debt concerns. This would show up through slower loan growth, which probably weighs on earnings growth. He would try to get this on a pullback. Dividend yield of 3.2%.