Toronto-Dominion Bank (TD.TO)

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.)

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.)