Wells Fargo (WFC)

(A Top Pick Nov 30/16, Up 8%) Tax reform is more important that Wall Street reform. He bought this when he got wind of the whole scandal of sales practices. He thought it was a good entry point. He uses the dip as an opportunity to buy more.

They were always credited for having a strong sales force but now we know why. Employees were getting threatened with job loss. Now there are no quotas in place and so they are not getting as many loans. He prefers other banking stocks.

A great example of “Where there’s smoke, there’s often fire”. They’ve had conflict of interests with sales practices, etc. Historically, they are now trading at a discount. The problem is, what originally started in the personal consumer bank, has now really bloomed out to some commercial practices and corporations. If it turns out this is really bank wide, you are dealing with a whole other can of worms. You always want a high-quality franchise such as Bank of America (BAC-N) or J.P. Morgan (JPM-N). (See Top Picks.)

(Market Call Minute.) There are better US banks to own. You aren’t going to get killed on this, but they are going to spend a little time over the next couple of years paying off a lot of lawsuits.

(A Top Pick Nov 30/16. Up 4%.) Bought this just prior to the Trump bump, but after they made the first announcement with respect to the deposit issue. He got a good price and a good dividend. The dividend will continue to grow. Trading at 1.2X Book, which is really, really cheap.

This is a little more sensitive to yield. Between J.P. Morgan (JPM-N) and this one, this is interesting, but there is hair on it from investment selling practices. Any time you come out from a “cease-and-desist”, it always takes a little while to get back to the former glory. The balance sheet is super sweet and clean so he wouldn’t worry about it if you are there.

Probably one of the more expensive banking retail stocks in the US. Good dividend yield. He likes this bank. There are some issues with the regulatory environment, simply because of what happened to them with some of their employees selling wrong products to clients. They have one of the best franchises coast-to-coast. Management has been very successful at creating shareholder value over long periods of time. They are going to take $2 billion in cost cutting by 2018, and another $2 billion in 2019. Cutting their branch networks by 450 branches.

(Market Call Minute.) There is an interesting revival happening here. He is still doing a lot of homework on this. There is a lot of technology risk here.

This has had troubles with all of its “fake” accounts and now, more recently, it looks like they are having some problems with insurance contracts. Seasonality for US financials is not in the summer. Chart is showing lower tops happening, which is a negative bearish pattern. It could break down to about $45.

This company is doing all the right things of cutting back on areas that look like potential problems, such as auto loans and student loans. Thinks you will make a 10%-12% return over a 5-year time frame. Dividend yield of 2.8%. (Analysts’ price target is $60.)

In the whole of financials, if you want something that has got some balance sheet and spread income, he would go with the money centred bank, not a regional. There is more capital market exposure and an annuity revenue stream. However, he wouldn’t do it with this bank. Prefers J.P. Morgan (JPM-N).

If you look at this against other banks and do a peer group analysis, what worries him are the management issues and what they have done in the past year or so. It surprises him that this bank hasn’t suffered more than it has. He does not want his clients to be involved with this, and would encourage people to move away from this and go to Citigroup (C-N) or Bank of America (BAC-N).

This got hurt by its predatory sales practices. They are in the penalty box. The whole sector has been hit because interest rates have kind of retraced. Thinks the US banking sector is cheap. This one is generally the best of the whole asset class. It is only trading at 1.3X BV and 11X earnings. Its ROI is probably around 13%. A premier bank with great assets.

Sell or Hold? This has been an under performer. It has a massive franchise in the US, which is not going anywhere. He would be more inclined to look at something like this, that has underperformed, rather than buying something that has already performed well.

Owned this at the time of their fiasco, and sold his holdings. It was not a situation he wanted his clients to be a part of. The risk profile of that bank increased dramatically in comparison to its peers.