Toronto-Dominion Bank (TD.TO)

The Canadian banks have had a good summer. They were range bound and then boomed. TD-T is in an uptrend, but overbought. The seasonal period for banks in Canada ends in December. It could continue to run up until then.

Canadian banks are trading at a PE of anywhere from 10 to 13 times, yielding close to 4%. With Trump, if tax rates go down, it is going to benefit this bank to a huge degree, in step with Royal (RY-T), because they have the biggest operations in the US. It will also help CIBC (CM-T) and Bank of Montréal (BMO-T). From a risk standpoint, Canadian banks are still holding up pretty well. Leverage isn’t overly excessive, compared to European banks. This bank just raised their variable rate mortgages to deal with what the federal government is throwing at them of almost having to put up a bond indenture against CMHC risks. He would buy a half position to start, and then see what happens.

The 5 big banks in Canada are effectively an oligopoly. They are well positioned, but without higher rates the average Canadian is leveraged to the gills. Mortgage debt is very, very high. There will be some upside, but there is going to be more upside in US operations. There is some upside here, but not to the same extent that there is in the US.

They have a good US business. If you believe there are any positive results from the stimulus in the US, and with a steepening yield curve they would do reasonably well.

We have had a run with the financials. We have a base having formed. We have a channel that it broke out of recently. He would not be surprised if we got it below $58 again if you want to wait before getting in. If it does not find support there it would be around $48.

The US subsidiary is an incredible franchise. He loves TD Bank and owns it. It has a 3.6% dividend and is trading at 13 times earnings. If the US yield curve steepens then TD will do very well. TD can sell a lot of products through Ameritrade (AMTD-Q). You can buy Ameritrade to get just the US portion but he has the Canadian company.

A well-run bank. The dividend is safe and secure, and it should continue to grow at a modest pace for the next number of years. Trading at a pretty reasonable multiple of about 13X or so. They are well positioned on the consumer side in the US. Their capital markets exposure is relatively limited, which is a good thing.

(A Top Pick April 27/15. Up 13.48%.) Generally likes the banks. There are some headwinds with #1 the new mortgage rules, #2 stress testing for new mortgage applicants and #3 financial technology, with the waste nibbling at the edges. The banks can cope very well with all 3.

He recognizes there are some headwinds with the new mortgage rules coming out, stress testing for potential new mortgage applicants and the waste nibbling at the edges, which he feels they can cope with very well. They own 43% of TD Ameritrade, which just acquired Scottrade Financial. In the short term, this is going to help them round out their US business. He likes the US because of the economic pick up, and this bank is well represented. He is sure there will be other acquisitions. Dividend yield of 3.66%.

What is really good about this is that about 24% of their earnings are in the US. That is really helping them with the Cdn$. Trading at a premium to the other banks, and is probably a level where it shouldn’t go too much further from here. We are only seeing about 4.5% EPS compounded annually, 2016 to 2018. There are others that have better growth.

Buy TD in the US or in Canada? If you have some US money, his suggestion would be to look at Citigroup (C-N). TD is a pretty good name, and he thinks TD in Canada is probably better than TD Ameritrade (AMTD-Q). Solid customer base and decent revenue growth.

Feels this is the best of the Canadian banks going forward, because of the US deposit base. If rates go up in the US, they are going to be making some money off of that. Also, thinks they are going to get better growth in the US.

(A Top Pick Sept 24/15. Up 11.15%.) There is a big market in American retail banking. He wonders if they are going to pick up some of the Wells Fargo (WFC-N) market. Had very nice earnings, and like all Canadian banks benefits from the very cozy oligopoly. Trading at only 12X earnings with a 4% dividend which keeps growing.

Doesn’t see as much growth out of this in the next couple of years as he does out of the others. It is about 4.5%. Trading at a premium valuation. Q3 numbers were very wholesale heavy. Their flagship Canadian unit was fairly sluggish. This has benefited from having the biggest US exposure, and you are probably not going to have the same performance in the next year or 2.

A very unique Canadian bank. They have a strong US presence. However, the return on that business has not been as good as people were expecting. He doesn’t think the Canadian banks are expensive. Very rigorous on cost cutting, so you will be able to see some earnings growth from that.