Toronto-Dominion Bank (TD.TO)

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.)

This is at the bottom of the group, and it is a bit of an anomaly in that it is 50% US retail banking. In theory, if Bank of America is up 30%, shouldn’t this one be up 15% since the election? It is not. Thinks they are going to have better margins on the US side this year. They are going to be a big beneficiary of higher rates. Dividend yield of 3.3%. (Analysts’ price target is $66.84.)

Will the Donald Trump presidency significantly impact?He assumes some of the policies, perhaps deregulation, will assist. Definitely the rising US interest rates will help. This is a wonderful bank and they are terrific operators. Their balance sheet is primed and ready to make another acquisition. He expects pretty good years going forward for all Canadian banks. Everybody now loves them, so you shouldn’t be running out buying them at the moment. Wait for a pullback.

(Top Pick Jun 22/15, Up 31.85%) He still likes it. This is the best play. The banks may pull back 5% soon. Canadian banks are cheaper than some US banks. Risks involved are a slowdown in mortgage growth. There could be some legislative risk also.

Has owned this for a long time, because half their business is in the US. They are also taking market share from US banks. However, you are not going to see the same growth you saw from 2005, when interest rates started to hit their bottom, and everybody started to pile in to buy new houses and taking out very cheap mortgages. He would recommend this one for the long run.

(A Top Pick Dec 10/15. Up 246%.) Buy a Call. This is good until January of next year. He still likes this.

This has been one of his long-time favourites, partly because they have significant exposure in US retail banking. This tends to not be spectacular in their quarterly results, but they are very steady, and they have the size to show for it. A good long term holding. Dividend yield of 3.4%.

The banks have done well off the summer lows. He thinks they are tremendous shareholder value creators. TD-T is at the higher end of its multiple range, but it is keeping pace with some of its peers in the US. He is seeing a real game changer in their US subsidiaries with a roll back on restrictions. He sees a bright outlook for the banks.

He was a little disappointed in their last result. The Canadian results were a bit soft. His disappointment was that the US numbers weren’t better, but thinks they are going to get better. The US regulatory climate looks like it is going to get better. Dividend yield of 3.47%. (Analysts’ price target is $65.43.)

Of all Canadian banks, this is an incredible retail franchise in the US. That is quite a substantial part of overall earnings, 30% or so. Since it is predominantly a retail oriented bank, they get the benefit of rates going up, because they borrow very cheaply from their retail clients, and lend out longer. Also, they own about 44% of TD Ameritrade, and just bought Scott Trade as well. It should continue to do well.