Keycorp (KEY-N)

(A Top Pick Aug 22/16. Up 54.49%.) A small-cap bank. If you are risk averse, he would advise you to get out of the stock. If not, the story is still good. Thinks there is still some upside, especially if interest rates go up.

Recently hit a 10-year high. They did an acquisition of another bank recently that is going very well. He generally doesn’t like bank stocks, but if he is going to buy one, this is one he does like. This is not for the faint of heart, there is a lot of risk in stocks like this.

(A Top Pick Aug 22/16. Up 36.98%.) If you are bullish on a sector, and you are right, you are going to do better on the smaller and mid-cap names.

Believes it is the 5^th largest bank in the US. Has a nice dividend yield of 2.7%. Very strong in commercial lending as well as business lending, and works with consumers. Has very good relationship management with communities in the Midwest. It really makes sense to buy a company like this. There will be more integration and more acquisitions within banking.

Financials are cheap – 8-9% earnings yield. He likes the numbers – a little bit of growth.

By and large US banks are quite cheap. There is still a holdover from 2008-2009 where there were some issues. The longer that time goes on, the longer interest rates stay low and the longer these companies get rid of and restructure their balance sheets, the better is their outlook. They all have good upside potential of 50%-70%. It is a question of when the market is going to be a little more relaxed about the stocks and freely buy and recommend them again.

At one time this is one of the banks that was of great interest when it was lower down. He wouldn’t be buying into it now. Prefers a stock when it is half the price. It has a real momentum flavour about it.

Likes the regional bank space. He is a big believer that the US is a country that is driven by small and medium-sized businesses, versus large corporations. This one has a great balance sheet and they have a management team that understands the business. Net interest margins and loan growth is what really drives regional banks. Looking out over the next several quarters, interest-rate margins are going to get better and there is an opportunity here for loan growth. $13-$14 over the next 12 months.

With the US becoming more self-sufficient in energy, will this affect the small pipelines negatively? We’ll have to see how that works out. One of the problems with oil coming from fracing is, what is the curve going the other way. The sustainable production declines quickly. Well managed.