Toronto-Dominion Bank (TD.TO)

One of the best run banks in Canada. If they owned banks (typically his funds don’t invest in them) this probably would be the one. They are a dominant player in Canada. And also, they did a good job growing in the US. Tax reform in the US benefits them.

(A Top Pick March 3/17 - Up 6.2%.) Still like it. Like the US operations. They have more branches down in the US than they have in Canada. The Canadian Banking system is more organized than the US. He thinks better results from the US operations with the US economy growing

One of his favourite. The better investment timing is when yields are closer to 5%. Don’t chase yield, however. He is looking more to US banks right now.

He likes the US business and thinks there is some upside there. The wealth management business is great. Higher interest rates will benefit their US business. Dividend yield of 3.2%. (Analysts' price target is $79.10.)

Announced a forthcoming $400 million write down on the US side of their assets. Some US banks took big write-downs because of the way they are being taxed. The US banks are the sector that benefits the most from tax cuts. They pay a lot of tax and their tax rates are going to go down a lot. In order to take advantage, there is some short-term house cleaning they have to do. The market realizes these are a one-time item so US banks literally have no impact from write-downs. Expects it will be the same for this bank. Going forward, there could be a pretty good surprise, as far as the impact on the tax changes for this bank. He would buy the stock here.

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.)