Wells Fargo (WFC)

Loves this one. A great story. Well managed. Looking at it in 5 years hence, the price will be higher and presumably you will have further dividend increases to support the price growth.

Feels the Canadian dollar will go lower and it will help US investments.

Bought recently. Number 1 in retail deposits and mortgage markets. There is a long way to go from here.

Probably one of the largest mortgage originators out there. As the housing market heats up and household formations get back to historical norms, loans are made a little more easily. Of all the banks, he feels this is going to be the major beneficiary of that.

Pays 2.5% dividend vs. other banks not doing that. Will continue to increase dividend and buy back stock.

This is a super regional bank, which he likes. Has a pretty solid portfolio of mortgage origination, mortgage servicing as well as a nice asset management business. Well diversified, so when one part of the business is not doing particularly well, others are. This contributes to their earnings. Good management. To enter you could wait for the 200 day moving average.

This is really a play on the US economy. They are seeing lower mortgage volumes. The #1 mortgage originator in the US because of rising rates but she feels mortgage volume will eventually come back. Also, a big mid-market lender in the commercial space. Made a big acquisition in 2008 just before the crash, which doubled its presence in the US East Coast giving it a lot of opportunities to cross/sell products there. More than half of their revenues are from fee-based income business. Yield of 2.68%.

Wells Fargo is more of a traditional bank. He owns BAC-N. Either one is good. Wells is a solid play on the housing market.

January 2015 42 calls. This is a 2-pronged attack. This bank is the largest originator of loans for homeowners in the US. If you believe that the US real estate market is stabilizing, which he thinks it is, and recognizing the month of reserves in the system, this is a very well run bank. This is one that he thinks people should take a very hard look at as an alternative to Bank of America (BAC-N).

Dividend yield of 2.7%, which is reasonable in the context of the other US financial institutions. He likes this because it is leveraged to the US economy and the US housing market, which has a long ways to go to get back to a normal level of 2004-2005. There is a lot of upside being the biggest mortgage lender in the country.

A fabulous bank. Very well run. It’s not so much the mortgage business. The refinancing business is in a rising rate environment and no one is refinancing. This takes a lot of business away from the banks.

Does very well on the retail side and didn’t get into trouble during the crisis. Prefers C-N.

He is constructive on this because it is more of a retail bank. They are focusing on providing banking to clients and not a lot of outside baggage.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? The longer-term view on US banks is, for the last 30 years, one of cyclicality. If you catch the trades right, US banks are very, very good. J.P. Morgan had a good risk culture but this one was better. Big challenge for money center banks is that they are going to have the strong glare of the regulatory lights. You will definitely get upside gains from recovers of unemployment, people taking loans, health recovery, etc. Feels regional banks will offer you more upside. (See top picks.)

As interest rates rise, the question you have to determine at this point is, will that snuff out growth or will it stall the housing recovery. He thinks the housing recovery has plateaued for now. Mortgage banking may have 4%-5% growth. This one also has a big asset management business as well.