Canadian Imperial Bank of Commerce

CM-T

TD is the class act. CIBC is the step child in the Canadian Bank industry. The Canadian Bank oligopoly is not going away. If you want to make money in the 3-5 years buy TD if you want to collect the dividend buy CIBC.

The first of the Canadian banks to report next Wednesday. They have been hurt due to perceptions of being more of a domestic only bank. He is hoping to see what they mortgage portfolio looks like and what they are projecting for loan losses. He likes their yield of 5.1%. He would not be a buyer or seller here.

They're trying to break into the US market: 25% of earnings there is the target. They aren't buying back shares to the same degree at its peers. It's trading at a valuation discount vs. its peers. So, if not buybacks, is CIBC plotting an acquisition with their cash? He doesn't know. There are better opportunities elsewhere.

Pays the highest yield among the big banks. Even though they damage themselves, CIBC will continue to pay that yield that they will increase. Buy this for the income. (Analysts’ price target is $123.93)

He likes CM-T and thinks the sell off makes it good value and at good support -- great upside potential -- and the best yield of the Canadian banks.

Two items -- 5% dividend yield and it trades at less than 10 times earnings. Always a winning combination histortically. Yield 5.03% (Analysts’ price target is $123.93)

The next interesting place is about $112 and then $120. There have been better places to put your money. He prefers other financials than banks, where you will be stuck in a band.

This has been disappointing for the past couple of years, but the dividend yield of 5% is good. He would not worry about holding this. His stop-loss would be $100.

CIBC vs. BNS Canadian bank shareholders haven't made money lately including himself. The market has been worrying about bank prospects (i.e. mortgage defaults) constantly, and yes Q1 was weak, but he expects banks to show positive earnings. Also, they trade at 9-10x earnings and pay good dividends that'll grow. Of the two, he'd pick BNS.

Canadian banks in general are strongly managed from a risk perspective. They are not a black box. People around the world look at headlines. Financials is 25-30% financials. He is only 5% weighted on Canadian banks. Not because he is negative on them just he likes better other areas of the market better. Just don't be overweight banks.

If it breaks through $109.50, you'll go down to $105, and then the next spot is $98. Banks are predictable, not a big drop. Better places to deploy capital because of seasonality and rate slowdown. He'd look at it again around $100-105. Interest rates would really need to rise to see it break through.

The Canadian banks are good value. They've come off their highs in the recent reports, due to the harsh market action in Q4 2018. CIBC is the cheapest of the pack in terms of PE and highest yield, but it's also had its issues. It's priced accordingly. He likes the American exposure of TD, though. These are not expensive stocks. You can't go wrong with these banks.

TD-T vs. CM-T. The banks this year should have an up year. He prefers TD-T. CM-T has the most exposure to Canada. They are going to do US acquisitions but those they buy will be at much higher multiples than CM-T trades at now so it will be dilutive.

They are the most attractive from a valuation basis. 5% yield. Canadian banks above 5% yield are always a buy. CM-T has not participated in recent strength in banks. It’s a buying opportunity.