Toronto-Dominion Bank (TD.TO)

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%.

Seasonality for most of the banks in Canada is from approximately the beginning of September right through until the last week of November. They have a history of moving higher until reporting their 4^th quarter results, but then tend to sell off. The 2^nd period of seasonal strength is from approximately March through to May.

The main attraction, would be its growing US presence. He doesn’t own it, because he has no problem going to the US and buying US banks if he wants US bank exposure. However, this bank is fine.

Has been a favourable story this year. He is continuing to buy for new clients. The US portion is obviously benefiting from higher rates. If you can get it slightly cheaper, that would be good, perhaps in the new year.

Buy an “in the call money” with a $72 strike price, and going out as far as July? He looks at price, and what he wants to achieve when he does this option trade. Normally he is looking for income. July is a long way out, and doing something like that you are really going to be paying an awful lot for an option premium, which is why he likes selling options. He would rather have people give him the money. You need to think about this a little more, especially if you are thinking of “in the money” calls. That compresses the time value as option traders don’t like to pay too much for stuff. Remember options can expire worthless.

Analysts are looking for some upside. He would hit the sell button. He has no direct exposure to the Canadian banks. He thinks we’ll come back to the $62 level. Wait on the sidelines for a correction within the next year. There is nothing wrong with TD-T specifically.

They did extraordinarily well coming out of the financial crisis. So much of their direct lending was leveraged to the energy space but now prices are up to $55 for energy so they will not see the large defaults people were afraid of. His preference would be BNS-T. TD-T is probably the best to play the US. They took on a competitive US environment and did very well. No one in the US thinks of it as a Canadian Bank. You are betting on the strength of the US banking system doing well. He prefers BNS-T because of the international exposure.