Wells Fargo (WFC)

(Top Pick Jan 21/16, Up 23.09%) He sold in November based on difficulties they were having internally. This just did not feel good. He traded it out for BAC-N on November 1.

This stock has lagged its peers. It is lower than where it started the year. It lost the premium that it always had to its peers. (Analysts’ Target: $55.90).

He has been favouring regional banks over big US banks. This one has been underperforming most of the others because of the controversy over its selling practices. There is a lot of negative headlines, which will probably blow over in the long run, but for now there are better ones in the US and Canada.

Of the major money-centred banks, he would probably rank this at the bottom of the big 4. They’re going to have more consumer issues over the next year or 2. They’ve had a premium valuation which is going to erode a little.

He owned it until October and moved to BAC-N. It was the well publicized issues they had. Move to BAC-N or C-N.

He likes it here. The chart looks similar to a lot of other American banks. It was one of the best run banks in the States until recently. He thinks it will return to its previous status.

US financials have been a big holding for him. The risk return is not as good as it was just a few weeks ago. He has begun reducing his holding.

(Market Call Minute.) J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? He likes both, but in the near term, Wells Fargo has some issues, so he would go with J.P. Morgan.

He likes the US banks. This one, in particular, has lagged the group because of some of the problems they had earlier this year. Trading at a pretty reasonable valuation multiple. As interest rates move up, the net interest margins are going to expand significantly. Doesn’t think people appreciate how much earnings upside these banks have if net interest margins normalize. Over the next few years, there could be 50%+ upside on earnings per share. It is only trading at 12.5-13 times earnings. Dividend yield of 2.8%. (Analysts’ price target is $53.10.)

This had been a traditional blue-chip name in banking. It has the largest mortgage book in the US. Rising interest rates are good for banks. The problem was when they got hit with opening false accounts. Trading at about 11-12 times earnings, and historically has traded at 16 times. This is a multiple expansion play just to get back to normal. Also, Trump wants to reduce banking regulations. Dividend yield of 2.88%. (Analysts’ price target is $52.81.)

His least favourite of the larger US banks. It has been for some time, not because of the headline risk and how they deceived shareholders by fabricating accounts. It has been because the valuation has been so much higher, and has traded at such a premium to BV compared to others. Thinks there is better value elsewhere.

This has gone through some difficult times of late. Their CEO left and they got a new one. The whole premise was that they were a store as opposed to a bank, which created a very sales oriented culture. They are now past that, and it is a great bank. This is a cheap stock. The steepening of the yield curve really helps them. If you can buy this at a good price, you should do well over the long-term.

(Top Pick Dec 10/15, Down 0.67%) He would stick with it for now. He believes these banks are positioned to be some of the leading stocks.

BAC-N vs. WFC-N. There will be a bit of a push back on regulations by the industry. The big banks will only benefit from all that. Both banks will rebound. Warren Buffet is not a seller of his WFC-N. Short term BAC-N would be his favourite and WFC-N would be his favourite next year if there is no other negative news item.

Wells Fargo (WFC-N) or Citigroup (C-N)? He prefers Citigroup easily. This company’s problems have been dealt with, but they are not going to go away in a hurry. The brand and the consumer sentiment has been hurt, and is going to hurt them a lot longer than most people are recognizing.