Wells Fargo (WFC)

January 2015 42 calls. This is a 2-pronged attack. This bank is the largest originator of loans for homeowners in the US. If you believe that the US real estate market is stabilizing, which he thinks it is, and recognizing the month of reserves in the system, this is a very well run bank. This is one that he thinks people should take a very hard look at as an alternative to Bank of America (BAC-N).

Dividend yield of 2.7%, which is reasonable in the context of the other US financial institutions. He likes this because it is leveraged to the US economy and the US housing market, which has a long ways to go to get back to a normal level of 2004-2005. There is a lot of upside being the biggest mortgage lender in the country.

A fabulous bank. Very well run. It’s not so much the mortgage business. The refinancing business is in a rising rate environment and no one is refinancing. This takes a lot of business away from the banks.

Does very well on the retail side and didn’t get into trouble during the crisis. Prefers C-N.

He is constructive on this because it is more of a retail bank. They are focusing on providing banking to clients and not a lot of outside baggage.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? The longer-term view on US banks is, for the last 30 years, one of cyclicality. If you catch the trades right, US banks are very, very good. J.P. Morgan had a good risk culture but this one was better. Big challenge for money center banks is that they are going to have the strong glare of the regulatory lights. You will definitely get upside gains from recovers of unemployment, people taking loans, health recovery, etc. Feels regional banks will offer you more upside. (See top picks.)

As interest rates rise, the question you have to determine at this point is, will that snuff out growth or will it stall the housing recovery. He thinks the housing recovery has plateaued for now. Mortgage banking may have 4%-5% growth. This one also has a big asset management business as well.

Generally speaking, he likes the financial sector. If you are playing into the US housing recovery and with Bernanke’s statement that he is going to hold rates lower in the short for longer, it only bodes well for these types of companies. This one can continue to do quite well.

3% yield, model price $38.18 and it is bang on the price. If you are looking for value, you may make money on this. Bigger banks offer bigger return potential. The money has been made.

One of his largest US positions. Prefers over Canadian banks. Earnings are poised to grow. Exposure to housing through their mortgage business. Seen as one of the highest quality US banks so a slight premium to other US banks.

Very high quality name. She doesn’t own any US financials. This is probably a good name to own if you want exposure to US banks. Has had a good run, so you may want to wait for a pullback. 3% yield.

This is one of those banks that came through the crisis very well. Have rebuilt their capital. They were held back on dividend increases. Paying out only about 20% of their earnings in dividends (2.95% yield) but this could go to 40% over the next few years. A play on a slowly recovering US housing market as well as commercial lending which is showing double digit growth.

Perceives a risk. She plays banking sector in the US with C-N, which is still a buy to her.

Great bank and never got itself in trouble during the financial crisis. Had a much stronger balance sheet and much better loan book than its creditors. To him a lot of the US banks, including this one, have recovered and are trading at fair value. Better value elsewhere.

Best run bank, perhaps globally. Fabulous management team. Generating gobs of cash, buying back shares and raising dividends. Fully recovered from the 2007 prices. There is a rumour that they are going to be bidding on some UK assets. Swimming in cash.