Wells Fargo (WFC)

(A Top Pick July 14/15. Down 13.07%.) One of the best managed US banks. Energy is only about 2% of their loan portfolio and is fairly manageable. She still likes this. Trading at about 1.3X Book. Their ROEs are consistently above 11%-12%. Still a Buy. Dividend yield of 3.5%.

If you are going to buy one US bank, this would be it. The loan quality, credit quality and management are superb. However, it is one of the more expensive large cap banks in the US. It depends on your time horizon. Eventually rates will go up. Dollar cost into the name over the next year.

Generally, US banks are cheaper than Canadian banks and have more potential upside, but yields are much lower. He likes this because he likes US housing, which is one of the continuing positive drivers of the US economy, and this is a major player in the mortgage market.

The Fed has flip-flopped everywhere on rate hikes, and US financials have flip-flopped with them. US financials are very, very hard, because the Fed doesn’t know what to do. Until there is more clarity he feels financials go nowhere.

US Banks? The whole notion of lowering interest rates and all these efforts that Central bankers have taken, is really just to ensure the system doesn’t break down. This bank is one of his favourites, but he owns TD (TD-T) which he considers as Wells Fargo North.

(A Top Pick June 16/15. Down 15.85%.) The financials are the weakest sector in the S&P, and that would have fooled a lot of people this year. All the banks are being held hostage to a flat yield curve, which is what the Fed is giving them. Doesn’t think this will do well starting tomorrow morning. Longer-term he thinks financials will be a winner.

Unlike some of their competitors, they do banking the old-fashioned traditional way. Has a very, very large deposit base. This is going to really require a play on the interest rate environment for it to work. With a 3% dividend, you get paid to wait.

You have to remember that stocks spend a lot of time doing nothing. WFC-N are dominant in the mortgage market and will benefit as the housing market does. Financials were underperforming until about 6 weeks ago. We are seeing signs of domestic improvement in the US. Be patient.

They are the Cadillac of the operations. He thinks they will get better growth going forward as Interest rates start to normalize. It is a good safe pick.

Has done better than some of the other big money centred banks in the US. He is fairly cautious on the big banks in the US. Doesn’t think all the bad news is priced in. This bank missed expectations in Q1 by about 5% year-over-year. A big part of that was growth in the loan loss provisions because of oil and gas. Prefers regional banks such as Columbia Banking System (COLB-Q) and City Holding (CHCO-Q).

A large money centred bank, and a little more mature and stable than a Citigroup (C-N) or Bank of America (BAC-N) coming off the ‘08 experience. Not as inexpensive as the others, but more stable. He likes this bank. Citi is trading well below its tangible BV.

Had held this, but as it became clearer that equity markets are more sustainable, he was interested in having a bit more capital market exposure. Because of this, he recently sold his holdings and added J.P. Morgan (JPM-N) as a new position.

Best of breed in terms of quality of lending. If there are headwinds, this will be one of the better ones to own. He doesn’t like the banks overall, however.

It is a premier, high quality US bank. He has JPM-N, but they are similar. The issue has been that all US financials have underperformed over the last year. Banks need higher interest rates over time to earn net margins. Eventually we will see more normal interest rates. Now is not the time to sell, maybe even buy a bit more.

Citigroup (C-N) or Wells Fargo (WFC-N)? There are very large differences between these 2. This would be more like our Toronto Dominion (TD-T), with mortgages, retail banking and being more consistent. You are not going to get huge positive upswings when things go really well, but you are not going to get those down swings either. Longer-term this has more prudent management.