Toronto-Dominion Bank (TD.TO)

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.)

The Canadian market has come off about 5% from the highs. This is why the banks are off from earlier in the year. There is definitely risk around real estate and the Canadian economy. Banks are much more attractive at the level they were at about the time of the Trump election and there is a risk they will go there again.

He likes their PNC business, the efficient quality of their loans and the efficiency that they are running their affairs. They are very focused on cutting costs and making the whole organization more efficient. The quality of their credit losses is one of the best of the bunch. Also, likes that they can innovate with new marketing, especially in the US. Dividend yield of 3.7%. (Analysts’ price target is $71.)

(A Top Pick May 27/16. Up 17%.) Banks make a great, solid part of your portfolio. Dividends are okay and they increase on a regular basis. He likes this bank, particularly because of their expansion into the US. A little disappointed that it has not paid off recently, but he understands they are reorganizing in the US.

Canadian Banks should be in a relatively decent position to exhibit mid-single digit to potentially high-single earnings growth during the next few years. Relative to the US banks, the challenge is that Canadian consumers are highly leveraged, so there will be less loan growth. This bank is one of the names that he likes. They have an under leveraged deposit base in the US, which they can use to affect a significant increase in earnings.

Toronto Dominion (TD-T) or Bank of America (BAC-N)? Bank of America is not one of his favourite US banks. He would rather own J.P. Morgan (JPM-N) or Wells Fargo (WFC-N). Between these 2 banks, he would rather own Toronto Dominion.

He is not that excited about Canadian banks, but owns a small position in this one. He prefers US banks. He likes TD-T because 35% of revenue comes from the US. 12 times earnings. It might be an attractive entry point.

Don’t have too many Canadian banks in your portfolio. This is one of the better ones to have. People are concerned about bank stocks in general because of a flattening yield curve and their inability to grind out profitability, because the spreads are so low. There is also some concern about this bank because of auto loans in the US. If you have a 5-10 year horizon, banks are good places to be.

Canadian Banks have rewarded long-term investors. The total return has been absolutely amazing over the last 20 years. This quarter, Canadian banks have been active in buying back stock. They are overcapitalized and their results are terrific. This is one of his favourites.

It is not range bound enough for him to do options on it. The problem with the banks is that the neck line was broken and it is testing it. It would be a good thing if it broke out. The dividend does support the stock price entirely.

He really likes this. It is one of his core positions. He likes the US side of this. It is strategically placed to do very well, if the US economy even nudges higher.

Feels the sales practice report was overblown and is not going to turn into a long-term problem. Also, this is not just unique to this bank. The selloff has been a good buying opportunity. Dividend yield of 3.7%. (Analysts’ price target is $71.)

Like a lot of Canadian banks, it has US operations, which would probably be the one area he would be most excited about, in part because the US banks find themselves in a better environment than they do in Canada. Thinks there will be legislation changes in the US, which favours bank shares in general. The flipside is the constant buzz on the Canadian real estate market. This bank operates in the prime mortgage market. Doesn’t think you’re going to make a lot of money in any of the Canadian banks right now. He would much rather focus on banks internationally rather than domestically.

Historically this has a bit of a pullback just after they report their fiscal 2^nd quarter results, which they just did last week. This is not a good time to be a buyer of banks in general. There will be an opportunity coming up. Historically they have a seasonal low around the beginning of October. It has a long-term support at around $58.

When the bad sales practices came out, they hit the banks. This bank admitted on their last quarter that they had no systematic issue. He would use that as an opportunity to buy. This bank had impressive numbers in their last quarter. Still trading at 11X earnings, and would be surprised if we didn’t see it doubling 10 years from now.