Richard CroftBMO Equal Weight US Banks ETFZBK.TOTOP PICKJun 29, 2015

The US bank sector of course has had a tough year, and the outlook will largely depend on the economy and rates. However, the fund now has an average P/E of 5.5X and an indicated yield of 3.49%. We think this is cheap enough that investors can slowly start buying the sector now. 
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Higher rates can be good for the financial sector. 
The main concern is whether rates push us into recession. 
Certainly a possibility, but right now the economy is much stronger than most expected, and thus banks should be OK for a while. 
At some point, the narrative is going to shift from higher rates to corporate earnings, and corporate earnings have been OK. 
ZBK we think can be held, but like any equity is not risk-free. 
We think holders should have at least an 18 month timeframe here.  
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He wouldn't buy the covered call. If you like American banks, buy them individually. He would rather buy ZBK which is a play on American banks without a covered call. Basically, you're paying a premium for covered calls..

US Banks. He still does not love them, but for the first time last week he exposed himself to a currency hedged version because it has currency exposure. It was a small bet because some small relative value is developing.

This is a way to play rising interest rates. Banks generate profit with interest spreads. This is a good tactical play. It could be a good hedge.

ZBK-T vs. ZUB-T. ZBK has exposure with US$ and ZUB has the currency hedged. He does not love US banks however.

Likes US banks, not currency hedged, as thinks Canadian dollar will still see weakness. US banks cheaper than Canadian right now. US banks numbers pretty good today. Investors will come out of tech and will probably will go into US banks.

With US banks, you are probably going to get a little earnings growth and dividend growth, but it won’t be spectacular, provided the US economy remains intact. Given that the US regulatory conditions are going to ease, this is really a good capital repatriation story.

BMO Equal Weight (ZBK-T) or Low Volatility US Equities (ZLU-T)?He would be buying the ZBK. They also have the ZUB, which is the Canadian hedged version. He likes the US banking sector. If you want something a little more aggressive which targets a particular sector of the market, he would be fine with ZLU.