BMO EQUAL WEIGHT BANKS INDEX ETF (ZEB.TO)

It charges a high 62 basis points, which is nuts. But it does access the Canadian banks. This should be 15 basis points tops. He still likes it though.

ZWB-T vs. ZEB-T. ZEB-T gives you the max growth of the 6 banks. ZWB-T enhances your yield and is more defensive. The covered call strategies have a little higher MER. The difference between them is the implied volatility.

It holds Canadian banks on an equal weight approach. If you have a small amount of investment capital (around $20,000 or more), he would suggest buying the individual banks yourself through a discount broker to avoid the fee with the ETF as the fund only holds 5-7 stocks.

Canadian banks are coming into seasonal strength, October until the end of the year. He likes the banks.

ETF versus buying bank stocks. Canada banks as a whole should continue to perform well. Regulatory testing on mortgages will be a headwind. Bank stocks generally trade at two times book value (which is relatively cheap) and the return on equity is better than the US. When interest rates rise they earn more. He thinks Royal (RY-T) and TD (TD-T) are best in class assets.

(A Top Pick Oct 27/17 Up 2%.) Has been underperforming lately. It’s a great sector and canadian financials are great companies, but he just thinks there are better opportunities somewhere else. They are looking to come back to the financial sector in January when banks do well again.

This is a seasonal period for the banks. In the past, when there has been a run-up and outperformance in the market in the summer, it has actually peaked in December. If you see a strong bounce and outperformance in Sept/Oct and Nov, earnings have to be really good. Investors want to be there for Q4 earnings, because that is where most stock splits and dividend increases occur. If there is a little bit of weakness, even on good earnings, that might be a time to lighten up.

Buy more of this ETF or buy the banks themselves? If you want some diversity and you’re not investing a huge amount of money, then the ETF is a great way to play the banks. There is a little management cost on this, so that will lower the dividend a little. However, all in all, you are getting diversification and more exposure.

This ETF or individual banks?Seasonal patterns tell us that we are likely going to have strong markets in the last few months of the year. This ETF allows you to purchase a basket of the 6 Canadian banks, which gives you an equal weight in one shot. You are paying 62 basis points, but it does give you a diversified mix. You might want to consider the BMO Equal Weight US Banks (ZBK-T), which he likes for its leverage. Interest rates are moving higher and faster in the US, in an economy that is a little more on solid footing going forward. Canadian banks are fairly valued at this point but there is still runway for growth.

Very bullish on Canadian banks in general. Believes you can pick and choose rather than owning an ETF. He likes Bank of Nova Scotia (BNS-T) for its international exposure which gives it greater growth potential. National Bank (NA-T) for its lower multiple. Toronto Dominion (TD-T) for its big US retail exposure.