Bank of America (BAC)

A huge retail bank, and also very much a capital markets bank. They will get some benefits from rising rates. The capital markets business, for him, is a kind of questionable business so he is avoiding that sector at the present time. They have international exposure, and the strong US$ is going to hurt them to some degree. He wouldn’t be initiating a position today.

(A Top Pick Jan 9/15. Down 3.49%.) Everything looks fine in US banking. Thinks this will do better. The earnings profile going forward looks quite good.

(A Top Pick Nov 27/14. Down 0.15%.) Still likes this, and hopes that this is the year for US banks. Trading below BV. Thinks dividends on US banks are going to go up a lot more over the next year or 2.

He sees nothing wrong with it. 2011 was a pivot point. He would not be discouraged. If we break above $18, it is a break out. The volume has to increase, though.

A stock he thinks will do well and is well positioned going forward. Something stable and steady and gives you a bit of yield, and trades at a 10X multiple.

It looks cheap, but if you go back to pre 2008, it was cheap then. He looks at companies that were trading higher before 2008. Even though BAC-N has been transformed since 2008, he would not see it as a long term hold.

Royal Bank (RY-T) or Bank of America (BAC-N)? Look at the economies of both countries and the balance sheets of both stocks. This one has a lot of good things going forward, specifically if you think rates are going to rise in the US. That will have a tremendous leverage to the uptick in rates.

(Top Pick Feb 18/15, Up 7.55%) Consumer credit started growing again. But it took all the way to December for the Fed to lift rates and it is hard for them to make money on widening spreads when interest rates are not increasing and they run a spread business. He thinks earnings will accelerate with increasing rates.

He is positive on all US banks at the moment. They have been going sideways for quite some time and he feels there is some pent-up energy. Interest rates going up should theoretically be good for them.

He thinks you should own a couple of US financials, from an interest rate point of view. Dividend yield of 1.16%.

Tech and financials are his top US investments. Valuation wise they look interesting and are trading at a discount to book value. You might see some of the acquisitions they did start to come back and generate some earnings. He sees improving earnings growth.

He paid a little over $6 for his holdings and has a target price in the mid-$30. Expects the CEO wants to increase the dividend further. They seem to be through most of their legal expenses. He is happy holding this and can see it doing a double from here.

One of their senior people said that for every 1 point increase in interest rates, they are going to make about $4.5 billion, which works out to about a $5 per share potential increase in stock price using an 11X multiple. The catalyst for growth in US banks is loan growth and a steepening yield curve. Also litigation costs are starting to drain out and getting much more manageable.

He is a fan of US banks, but not a fan of money centred banks like this. They have banking divisions, but also have big investment banking divisions. He likes regional banks that are just pure banks such as BBNT out of Wilmington North Carolina and Bank United out of Florida.

This is kind of a regional bank on steroids, given that they do have a meaningful retail banking presence. About 60% of their revenue is retail banking, but 40% is wealth management and banking investment. If you want exposure to wealth management and retail banking, this is a great name to own. Reasonable valuation. He feels the upside is really in the regional banks.