Toronto-Dominion Bank (TD.TO)

Has been somewhat disappointing in the last couple of quarters, particularly on the US side, and an area that is likely to come alive at some point. The move in the US to reduce regulations hampering US banks, should help this bank improve US profitability. Dividend yield of 3.48%. (Analysts’ price target is $72.)

He likes this bank, and would never sell it unless he thought it was completely overvalued or something material happened to it. The fire power of the banks has clearly been misunderstood by everybody on the street. This is the sweetest spot for Canadian banks in years. They are not expensive for what you are getting. (See Top Picks.)

As a group, he is not overly excited about Canadian banks. Prefers US banks, but owns a small position in this one. It has a very good ROE, and are able to compound the book rate at very high rate. Also, likes their US exposure. Very good capital markets franchise, a sector that he is very optimistic about. Trading at about 13X earnings which, over the long-term is a premium multiple, but with their growth profile, it makes sense to pay that premium.

Canadian banks are always a buy. They are benefiting from deregulation tailwinds south of the border. He would probably not sell. There is probably more to go even though they just hit a 52 week high. Buy, accumulate and use the DRIP plans.

The chances of them ever being taken over are very, very slim. The government is not about to allow one of the biggest banks in Canada to be taken over. All the Canadian banks have had a wonderful run.

The fastest grower among the large Canadian banks, growing earnings at 7.5% compound rate over the last 5 years. It tends to trade at a premium multiple to the rest of the group. Trading at about 13X earnings, a little above the bandwidth it has been trading at for the last 5 years. He likes that they have 35% of their business coming out of the US. That is an increasing proportion, because their US affiliate Ameritrade is in the process of acquiring Scottrade Financial.

This, along with the other Canadian banks, looks great. It has broken out. The sector might be a little overbought right now and it could pull back a bit, but he doesn’t think there is any danger of a massive pullback. Until that trend line breaks and takes out a low, continue to hold.

He has a preference for US banks, however this one does have a US presence. They have an opportunity to gain a lot of market share in the US. It’s a pretty good franchise and he likes it.

He looks at this as a US bank, as over 50% of their revenue comes from the US. He likes the US banking sector. This is a way of capitalizing on the US financial space, but by owning a Canadian bank, the dividend you receive qualifies for the dividend tax credit. Dividend yield of 3.23%. (Analysts’ price target is $68.39.)

Thinks all the banks generally are going to do okay in a rising interest rate environment. This one would be an interesting play here. It is quite frothy and there might be better opportunities in the US, but if you are looking for a Canadian portion of your book and would like some exposure, he wouldn’t see too much of a problem buying this. A quality franchise.

Along with a lot of other financials, it has had a big run post the US election. One of the attractive parts is that it has got the biggest US exposure of all Canadian banks. About 40% of its business comes from the US. With higher rates and bigger spreads and thoughts of more deregulation in the US banking industry, this is in a very, very good position. Trading in line with its historical multiples, so it is not cheap. Pays a good dividend yield.

He likes this bank. Has started to trim some of his Canadian bank holdings, and filtering the money into some of the insurers, some US banks and US insurers. This bank has been overbought at this time. Trading at $67 while the RSI is about $70. Trading at 13X forward earnings, a little bit above its historical norm. Not particularly cheap.

Canadian Banks? They’ve had a very good 2016, but remember that 2015 was a negative year for banks. They were down about 11% on average because of concerns on energy, housing crisis, etc. Earnings were revised upwards and multiple expansions back to historical averages. She still likes them, because she is constructive on the Canadian and US economy. Her long-time favourites have been Royal Bank (RY-T) and Toronto Dominion (TD-T), and also owns Bank of Montréal (BMO-T). TD and Royal have exposure to the US with TD at about 25%-30%, and Royal at 22%. Thinks Royal’s is going to increase as they are now integrating City National. These both are trading at reasonable valuations.

Banks are going to continue to be leadership. This is his largest single holding. He has tremendous confidence in management, in the strategy, and in the US expansion plans. Their acquisition of the discount brokerage of Scott Trade should be accretive to earnings.

He picked this because it has the biggest leverage to the US. They have expanded substantially into the US retail. They have more retail branches in the US than they do in Canada. Have built their brand, merging the 2 banks that they bought. They are deposit heavy, so have more deposits than they have loans. As the economy improves in the US, they can make more loans, which is good. If interest rates go up and they can expand their margins, that is even better. Dividend yield of 3.24%. (Analysts’ price target is $66.84.)