Toronto-Dominion Bank (TD.TO)

The only Canadian bank he owns. He likes that he doesn’t have to buy a US bank because of their US operations. They are retail in nature, which reduces the volatility of capital market activities. Fee income is a big focus for them. The only downside threat that could be out there are auto loans. Because they are in the US, they tend to do better than the American banks, which tend to be very fractured. They don’t have the systems in place like Canadian banks do.

He likes this company if rates rise in the US. They have opportunities in the US because it is a fractured industry. Retail oriented, so there is less volatility and safer, which accounts for a higher dividend over time, compared to the rest of the Canadian banks. Dividend yield of 3.7%. (Analysts’ price target is $71.)

Canadian banks look great right now. Chart shows this had a longer term of consolidation from 2014 to 2016 and then broke out. After topping out this year, all the banks looked like they are basing and trying to break out. Probably not a bad time to be buying the banks.

The rate increase will have less of an impact on them than the others. CM-T or NA-T would be two of the top to benefit from the recent rate increase.

This stock has finally is showing early signs of recovering after being in a downward trend. It is in a trading range and late last week reached above it. It is starting to look interesting, but on a seasonal basis it is strong October to December of each year. It is a bit too early to play the seasonal trade right now.

A serious long-term buy for people who speculate on things for serious stocks.

Canada has a banking oligopoly. This is the 2^nd biggest bank in the country. Has a very strong, dominant domestic franchise and a well positioned asset management franchise. They have a large and growing presence in the US. With interest rates hikes that are occurring in the US, the likelihood of them improving their net interest margins, and ultimately their profitability, is very good. Dividend yield of 3.7%. (Analysts’ price target is $71.)

This closed at $65.31, and his model price is $76, a 16% upside. Pays a nice yield of 3.67%.

He normally wouldn’t look at banks because their ROE is lower than the 20% cut-off that he likes to see. He owns this bank and the Royal Bank (RY-T). The banks will give you your 10%-15% long-term rate of return.

US banks have rallied, benefiting from the stress test, and are able to return more capital to shareholders, but that has never been a problem for this bank, which is why they have not benefited. However, deregulation as it is happening is going to benefit this bank also. As well, this bank has its great Canadian franchise and having a good balance between the US and Canada is a good place to be. 3.7% dividend yield.

If he were going to buy a bank, it would probably be this. He likes the retail focus, and it has far less exposure to Canadian mortgage market, and a lot less exposure than some of the other banks to energy lending. A good, steady, bread-and-butter business. With their exposure to the US, it should give them exposure to rising interest rates and improve their net interest margins.

Unlike some of the other Canadian banks, this doesn’t have much uncertainty around its US strategy. If there is one thing this bank does exceptionally well, it is retail banking. They have the formula and they have the model. Although they have rolled out in the US branches, he believes it is still in the early days and there is still lots more to go. Dividend yield of 3.7%. (Analysts’ price target is $71.)

The Canadian bank that is exposed by about 50% to the US, so you get good diversity. It has lagged a little. Canadian banks are marginally down for the year, and this one is well off its peak. He thinks it goes back to its peak as we calm down about Home Capital. He is looking at a total return of about 14% for the year. Dividend yield of 3.7%. (Analysts’ price target is $71.)

Toronto Dominion (TD-T), Bank of Montréal (BMO-T) or Bank of Nova Scotia (BNS-T)? He likes the financials. In Canada, the banks and insurers have underperformed the rest of the sectors this year. Rising interest rates is good for banks. This has about 60% of its revenues coming from Canada. Scotia has a lot of revenues coming from international markets and is a good name. He would prefer a combination of TD and Bank of Nova Scotia.

Banks are trading at 11 to 13 times earnings, which has been their historical range, while grocers are trading at 17 to 18 times earnings. He can’t figure out why the grocery business warrants a 5-point multiple over the banking business given the regulatory structure and the difference in dividend yields. Dividend yield of 3.7%. (Analysts’ price target is $71.)