Toronto-Dominion Bank (TD.TO)

(A Top Pick May 3/13. Up 33.64%.) Had a 2-for-1 stock split. Banks continue to perform well. Very comfortable that banks are going to continue to deliver reasonable earnings, probably in the 5%-7% range. On top of that you are going to get the dividend, probably in the 3%-3.5% range.

All-time high today. There have been a lot of people that have lost a lot of money trying to Call the top and Short the banks. These are diversified businesses that just keep churning out profits. The resiliency of these businesses is incredible. Certainly we are going to see slowing in loan growth, but today we saw that wealth management did well. Doesn’t think there will be a lot of growth, but you have low single digit growth and low single digit dividends.

(A Top Pick May 29/13. Up 27.05%.) Continuing to buy this for new accounts. Doesn’t see them going off making any rash acquisitions just for the sake of it. If something came up that was logical, that might be different.

Likes it. One of the stronger banks. Likes BNS and HCG-T slightly more. The Aeroplan credit cards should do well for them. He doesn’t want to be there because he doesn’t think banks will outperform the market.

Stock vs. Stock: TD or BNS. Half business is retail in Canada and then US puts it up to 70%. Lower return, but less volatile. Recommends you buy both.

This has a medium-term EPS growth target of 7%-10%. Until long-term interest rates go up, they’ll have a tough time meeting the 7% although he thinks they will do it through good cost control. When interest rates ultimately go up, it could exceed that 10% level. Because they had a lower dividend payout ratio than the others, he thinks their dividends will grow faster than earnings as they have now raised it to the 40%-50% range, the same as other banks. A good way of playing economic recovery in the US Northeast.

TD has it all. The winner of all the banks. Better earnings growth, better ability to protect loans and better US operations.

(Top Pick Apr 22/13, Up 33.46%) He is buying this for new accounts. It should be a core holding. Likes the North American growth profile.

He is not anticipating the Canadian retail network doing all that well. We are seeing more muted growth across the board. They have a fantastic operation and have built up a great US operation. You want to be patient with this one. You could probably buy this 8-10% cheaper this summer. Prefers Wells Fargo in the US.

(A Top Pick April 19/13. Up 33.07%.) Waiting to see what comes of the US as he feels that site is pretty critical. Looks a little expensive right now. Thinks they will continue to do what they do, that is, expand their US operations. In a great position to improve their penetration.

Likes it for the non-complicated exposure. No reasons not to hold it.

What are the principal metrics we should pay attention to, when comparing this bank with its peers among the Canadian banks? PE ratio is one thing. Dividend yield is another. He likes to look at Return on Assets as well. Usually for these banks, that number is paltry. If it’s plus .5, you are excited. One metric that Warren Buffett uses is ROA (return on assets). One of Warren’s top holdings has one of the highest ROA’s at about 1.3.

He has another bank as a top pick. Likes this one for US exposure so it is a long term buy.

Puts one month at a time. Naked put (undercovered put) writing is okay if you have cash behind it. Likes a covered call in terms of return. He would be concerned if the put got exercised.

Looking at all the Cdn banks right now, they all have that long, lovely, slow upward sweeps. Not only upward sweep in price, but also in Book Value. That will tend to carry on until the end of the market, whenever that is. At that point however, the nice benign behaviour stops and they take on tremendous volatility and they tend to fall very, very rapidly. This is currently probably in the 60^th percentile off the bottom. Definitely up but not widely expensive right now.