Toronto-Dominion Bank (TD.TO)

Came out with encouraging news the other day. They are expanding in the US and it has been underperforming. Last quarter their US side offset a decrease on the Canadian side.

Banks should start to run here. They have all fallen off a bit. The chart on this shows a big rounded top. It would need some sort of break out to a new high, which would get it above $59. If you’re buying this simply for the yield, this looks reasonable. Expect some volatility, but he wouldn’t worry about it on a long-term basis.

You are going to have a solid 8-10% total return. The key factor is how well it does in the US. As the US economy picks up it will have a positive effect on Canada.

One of his favourite banks, and he likes it because of its US exposure. Their exposure tends to be very close in Northern US, New York state particularly. However, they are expanding rapidly in Florida. If we are positive on the US economy, then a bank operating in that environment is probably going to do just fine. A good investment.

The best Canadian bank to own for foreign exposure, considering the low Cdn$. Have done a great job of building their US retail franchises. Also, own a piece of TD Ameritrade (AMTD-N), which is a big beneficiary of the strong markets in the US. However, Canadian banks in general are facing headwinds with weak energy prices, the difficult capital market activity and low rates putting pressure on net interest margins.

She can easily see this being up 10%-15% higher a year from now. The Canadian banks have all pulled back on concerns relating to energy and the fallout of lower fuel prices. Alberta housing is coming off, but other parts of the Canadian market are still robust. Have good US exposure through their acquisitions of the last few years.

For a long term hold, Bank of Nova Scotia (BNS-T) or Toronto Dominion (TD-T)? Of these 2, he prefers this one. Over many years they have expanded their footprint in the US and are quite strong along the eastern sea coast. They have more employees in the US than they have in Canada. Even though there are lower ROEs in the US, you are going to repatriate some of those earnings back to Canada, giving a benefit of 24%-25%. Extremely well-run.

If the Canadian economy slows, it makes people a little concerned going on from here. Any time you have a bit of a blip in respect to credit related to the banks, it is sort of exacerbated. As a shareholder, you are not going to get hurt like you would in the US, but you can definitely feel it. He is a little concerned because the credit cycle has been very favourable for a long period of time. It is a cycle and it does come back. He is generally underweight banks and would want to wait before getting a little more comfortable.

This bank has more branches in the US than any of the Canadian banks, and more as a proportion of their total ranking activity than any of the others. The weak Cdn$ means that whatever dollars they make in the US comes home and is worth more. Feels Canadian banks in general are oversold, and that this one is not being given enough credit for their footprint in the US.

Don’t let this market push you out of this stock. There is no disaster in front of these Canadian Banks waiting to happen. It is going to be slow going forward, though.

Toronto Dominion (TD-T) or Bank of Nova Scotia (BNS-T)? He does not have a favourite between these 2. They have different characteristics. The main point at the moment is that the banks are tending to be under a bit of pressure. Chartists will tell you they have broken out of their awesome moves over the last few months, and will continue lower for a while. This is partly to do with interest rates and partly to do with the profits they will make on narrow spreads.

Would you Short this for CGI (GIB.A-T) or West Fraser (WFT-T)? He wouldn’t Short a bank, even if he believed the banks went $5 lower. He would maybe Sell a Call. He doesn’t want to play the negative yield. This is a dangerous game. Banks have a tremendous ability to make money over the long term. This one has 24% of its earnings from the US and will benefit from a weaker Cdn$.

He loves it and has owned it for a long time. Canadian banks are pretty cheap these days. They had a nice pullback and you can buy a great franchise in Canada at a really good multiple. This is a company that has developed a brand name in the US that no one has been able to accomplish over the years.

(Top Pick Jan 22/14, Up 7.99%) Likes their exposure, and likes it better than RY-T’s. TD-T is expanding like crazy in Florida. Maybe they will acquire a regional bank down there, although the Canadian dollar would be a deterrent.

(A Top Pick Jan 7/14. Up 7.68%.) He owns quite a bit of this because of its US exposure. They have room to grow profitability in the US as the economy improves. Thinks Canadian banks are down to the point where you can buy them again for double digit returns over the next 12 months.