Opinions
Richard Croft
BMO EQL WGT US BANK HDGD TO CAD IDX ETF
ZUB-T
COMMENT
Oct 10, 2013
$17.680
Stock price when the opinion was issued
E.T.F.'s
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PARTIAL BUY
Basket of US retail and diversified banks. Don't have to worry about currency moves. He like the USD, so he'd prefer not hedged. Banks have gotten hit on recession worries. An opportunity here, though you might be a quarter or two early. Financials tend to perform well early in the cycle, though we're not there yet. Very cheap at 1.4x book value. Pick away at it. Best opportunities come when people are most unsettled. He's picking up some US financials right now. Yield is 2.3%.
E.T.F.'s
WAIT
Largest in the category. ZBK is unhedged, but there's a hedged version as well (ZUB). He'd opt to start hedging risk away a bit more, given what seems a concerted effort to weaken the USD. Gives you diversification in the US banks, instead of Canadian banks, as it's a different market and different economy.
Banks are very sensitive to the economy, and we're in a recessionary period. He'd wait for positive market follow throughs before allocating capital. If you're in it for the long term, you could buy this on the pullback. Interestingly, US banks are down about 21%, whereas Canadian banks (as in ZEB) are down 9%.
E.T.F.'s
The amount of money sitting in the banking system in the US today opens up a lot of potential. US banks are probably some of the strongest in the world because they have had so much money pumped into them. He likes the US banks and if he is going to be in the US economy, that is the safest place to be. The problem they are going to have is that if the regulations are kept the way they are, lending will be slowed down, which means there will be 2%-2.5% GDP nominal growth. That is not going to happen, and eventually US banks are going to take off. He prefers just buying Bank of America (BAC-N) stock.