Bank of America (BAC)

She has WFC-N. The expectation was very high that rates would be raised yesterday. The yield curve is flattening rather than increasing. WFC-N was not hit as hard during the banking crisis. BAC-N should be slowly improving their dividend.

Bank of America (BAC-N) or Citigroup (C-N)? The primary difference is that this is a domestic focused bank and Citigroup, is international and emerging market focus. There are definite tailwinds to both of these.

Prefers J.P. Morgan (JPM-N) for his clients, which he has owned since about 2012. His thesis was that the US economy and housing market was improving and at some point, interest rates had to go up. They probably all move in similar directions.

This has the potential to put some heat onto Wells Fargo (WFC-N) to regain its #1 standing. It has a wonderful footprint coast-to-coast. Also, they are very leveraged to interest rates. He loves this bank.

It is sitting on a support line of $21-$22. Buy a half position. They are bouncing off support. He favours JPM-N, but has nothing against this one.

This bank and the US banking sector over the last couple of months has retreated a little or gone sideways, partly due to bank stocks having such huge moves going up to the US November election. Feels all those things are still generally in place. We are going to see higher rates in some form of a tax cut. These bank stocks are quite cheap but in a month or 2, they should be a lot higher.

He likes the US banks. This is one of the cheaper ones, trading at under 1X BV. Pays a 1.3% dividend, but they have the potential to increase shareholder capital return to dividend increases and buybacks. They should also benefit from lighter regulation, lower taxes, and higher interest rates. Probably not a bad time to be picking away at this.

When you’ve gone through 15-18 years of up-and-down markets, people through their experience, start to look for the next major problem. The toughest thing in a bull market is to stay invested. This was at $12 in June/16. It rallied to $25. It is okay for it to sit and rest for 2 or 3 months. In the last two quarters they have had great earnings increases. Their BV is growing at 15%. There is no sign that this is coming to an end. An attractive place to be.

Financials are one of his favourite sectors. He would definitely recommend Holding this and buying on any dips. With the fundamentals of the banking sector, the wind is really at your back, because they had been regulated post the crisis, and have so much capital on their balance sheets, that they are the strongest they have been since World War II. By and large, the consumer is fairly healthy, so the loan book is actually quite strong for banks in general. Also, the Fed is embarking on raising rates. As they continue to move higher, higher interest rates are good for bank revenues. If Trump is able to put some sort of deregulation into the banking sector, that is icing on the cake.

Bank of America (BAC-N) or Citigroup (C-N)? This one will give you more of the mortgage business. If your a believer that the economy is going to continue to grow, housing is going to expand, then this is for you. It comes down to where your comfort level is going to be. He would personally prefer J.P. Morgan (JPM-N), given that their investment banking arm is probably doing better than Goldman Sachs (GS-N) right now. This is fairly cheap on a relative basis.

US banks took a big kick today. This is a good bank. He owns J.P. Morgan (JPM-N) and Goldman Sachs (GS-N), because he likes the underwriting as well as the commercial bank. You don’t get that with Bank of America. A lot of the enthusiasm about US banks, had to do with the Trump agenda of getting rid of a lot of the Dodd Franks regulatory structure. If you feel that the Trump thing is a tempest in a teapot and it is going to blow over, this is a buying opportunity. US banks are not expensive, and everybody should own at least one.

Liquidate? He never recommends liquidating. He likes to scale. If you’ve had a good run and there are good profits, and some potential risks to the downside, then you cut a 3^rd. If it keeps going up, then you are still playing, and then you cut another 3^rd. he doesn’t think we are going to get back to the levels that were there prior to 2008. Doesn’t see rates going up materially, from this point on. He would be inclined to scale out of bank names.

Banks are not as profitable now as they were prior to 2008, because they are less leveraged. This bank had to go for a bailout in 2008, and he doesn’t like companies where you can imagine them going out of business. Thinks there are better ideas out there.

The regulatory glare is moving away from money centred banks. If so, they will now be able to leverage up their balance sheets and start lending more. Even more importantly, we are facing an environment where interest rates are going to increasingly become an important factor for the US financial system. Higher rates mean higher profitability. Dividend yield of 1.2%. (Analysts’ price target is $26.)

(Top Pick Feb 27/17, Down 3%) He is adding to US financials on any pull back. They are in the value creation phase. The Fed will increase interest rates.