Toronto-Dominion Bank (TD.TO)

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.

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.