# Canadian Bank Stocks



## newfoundlander61 (Feb 6, 2011)

With the recent reduction in fees for stock trading with my discount broker (CIBC Investors Edge) I am preparing to buy Canadian Bank stocks and have the dividends reinvested to buy more shares. My main question is are all the Canadian Banks equal in regards to picking them for purchase. They all pay dividends, but are some better than others for long term investing.


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## Just a Guy (Mar 27, 2012)

Not all bank stocks are equal...but it depends what you are looking for when it comes to issues, since they probably each have something wrong with them.

Depending on how you look at them, a case can be made that some are better than others...but you'll find that there is a case for each (exposure to USA, exposure to Europe, exposure to high risk debt, etc.). 

To give you an example, BMO was listed, back in 2007/8 (just before the USA meltdown) as a top pick by Moneysense in their top 200 issue, ahead of the other banks. Two months later, after the meltdown, they were listed with CIBC as one of the two worst banks in Canada...mostly because they were supposed to have more exposure to the subprime meltdown and TD was listed as their top pick. From an investment point of view, you'd have done better buying BMO at that time, as it went up more than TD.

This week, moneysense has BMO listed as their top bank again...probably means the others are better. P-)


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## GoldStone (Mar 6, 2011)

Bank stocks are not equal, but good luck figuring out which one will be the best in the long run. Banks are the most followed stocks in the land. They have millions of investors' eyes on them all the time, including thousands of professional money managers. I think it's naive to think you can outsmart the market in this space. That would mean that you know or understand something that market as a whole doesn't.

Personally, I own all six in approximately equal weight. If you can't own all six, throw a dart at them.


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## birdman (Feb 12, 2013)

I own them all with the exception of BNS due to their exposure in Latin America and surrounding area. Could be a mistake as lots of others prefer this bank due to their geographic diversification. I'm heavy into RY and TD.


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## dubmac (Jan 9, 2011)

frase said:


> I'm heavy into RY and TD.


I have RY, BNS. 
I also some XFN which is an ETF with all of the cdn banks. pays a monthly distribution. yield 2.8%, PE around 9.


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## Oldroe (Sep 18, 2009)

I own all 5.

If you look at the daily charter they will pretty much look the same. The last time I bought was RY and the story is always the same RY is not this, they didn't do this, they are weak here. CIBC is always the wiping boy.

So It doesn't matter to me what the blah blah is I buy and 2-3 months later I'm smart again.


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## OptsyEagle (Nov 29, 2009)

Since you cannot directly relate the performance of a company with the future performance of a stock, since the future expected performance of a company will be built into it's present stock price, you would be best advised not to look too closely at "which bank you feel is the best" (or ask others to do so), when buying any of the 5 big banks.

You would be best advised to attempt to find the bank that is "most hated" and buy it.

I tend to use this chart that basically looks at the last year, where strategy says "buy the loser".

http://finance.yahoo.com/q/bc?s=CM.TO&t=1y&l=on&z=l&q=l&c=ry.to,bmo.to,td.to,bns.to

It is currently telling me that BNS is the one to look at. This method tends to work as well as any other that I have found. I doubt last year anyone would have said that CIBC would outperform BNS by 7% and pay a higher dividend, while it was doing it. That is because there was very little doubt last year that BNS was a much better run bank. That info would have been useful if it wasn't already priced into the BNS stock, before last year started.

The other method is to simply buy the bank with the highest dividend. This method would have put you in CM and BMO almost always, over the last 5 years and probably again today.

The least risk strategy, for Cdn banks, is to buy at least 3 stocks at the bottom of the above chart. That currently would be BNS, TD, BMO. This way, if one of your banks severely stumbles, it is very likely the other two will be the beneficiaries of the stumbler's lost business and investor's future trades out of the stumbler.


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## My Own Advisor (Sep 24, 2012)

GoldStone said:


> Bank stocks are not equal, but good luck figuring out which one will be the best in the long run.
> Personally, I own all six in approximately equal weight. If you can't own all six, throw a dart at them.


+1 and same.


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## fatcat (Nov 11, 2009)

My Own Advisor said:


> +1 and same.


i have gone all over the map on cdn banks ... i had all big 5 then went to to 4 td,ry,bns,bmo and now have settled on 3 td,ry,bmo

i am too lazy to run the numbers but i suspect that 3 gets you close to the average of all 5 over say 5 years ?

and you have less products to manage ... i may be wrong here and would love someone to point out my error


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## Toronto.gal (Jan 8, 2010)

GoldStone said:


> Personally, I own all six in approximately equal weight.


Started with five in approx. equal weight as well, but that changed when RY suffered the most back in 2011. I later sold TD and increased BNS, so I'm down to 4 banks with most shares in RY/BMO at present time.

Of course I DRIP them as well [lazy like fatcat when it comes to banks].


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## gibor365 (Apr 1, 2011)

Oldroe said:


> I own all 5.


I own all 6  Usually when 1 bank underperform others for couple of Qs, it will underperform in future... so I'd check and buy what is the cheapest bank as per P/E with combination with payout ratio and yield...


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## Beaver101 (Nov 14, 2011)

But by the logic of bank-stocks lovers, shouldn't one own the bank one banks at?


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## My Own Advisor (Sep 24, 2012)

Beaver101 said:


> But by the logic of bank-stocks lovers, shouldn't one own the bank one banks at?


That's like saying you need to own what you consume, some investors think this way. i.e., Enbridge (for heat), JNJ (for healthcare products), utility stocks (for hydro), oil stocks (to run your car), the list goes on...


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## Synergy (Mar 18, 2013)

Beaver101 said:


> But by the logic of bank-stocks lovers, shouldn't one own the bank one banks at?


I do, but just buy chance - TD & NA (personal & business). But I'm looking to eventually add RY and have I no plans on being a client of theirs.


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## Pluto (Sep 12, 2013)

GoldStone said:


> Bank stocks are not equal, but good luck figuring out which one will be the best in the long run. Banks are the most followed stocks in the land. They have millions of investors' eyes on them all the time, including thousands of professional money managers. I think it's naive to think you can outsmart the market in this space. That would mean that you know or understand something that market as a whole doesn't.
> 
> Personally, I own all six in approximately equal weight. If you can't own all six, throw a dart at them.


I tend to agree with this. There are elements of the future that are unknown. 

What is known is banks are a business that every other business and most individuals need. So they will always have customers. Canadian banks are regulated and the government seems to have done something right there because it is difficult to blow themselves up. I hope the Gov't don't goof it up later by meddling with a good thing. Too they are generally well managed. 

At last TD has a good business in the US. BNS has good businesses in Latin America. Ry has been on a 15 year upward streak. And so on. but who know the future of each bank? So equal amounts of each seems very reasonable. And don't forget NA, there is noting wrong with it. 

but don't get too over confident. If one looks at the historical charts these banks can have 30 to 50 % declines in bear markets. the price one pays, isn't always equal to the value you get.


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> http://finance.yahoo.com/q/bc?s=CM.TO&t=1y&l=on&z=l&q=l&c=ry.to,bmo.to,td.to,bns.to


that's a fine chart. And if you add a major index and BRK to the comparison over a longer time frame it would show why buying the banks is a very good plan.


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## Pluto (Sep 12, 2013)

Beaver101 said:


> But by the logic of bank-stocks lovers, shouldn't one own the bank one banks at?


Yep. 
If one feels safe with their savings in a bank, why not own the bank stock? Most people, I suspect, open an account at a bank because it is convenient location, or they know someone with an account there. And many then start saving like mad all the while not thinking that the best way to save, is to buy the stock.


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## gibor365 (Apr 1, 2011)

My Own Advisor said:


> That's like saying you need to own what you consume, some investors think this way. i.e., Enbridge (for heat), JNJ (for healthcare products), utility stocks (for hydro), oil stocks (to run your car), the list goes on...


and if I hold LMT, I should hold bombers and figher planes?!


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## OptsyEagle (Nov 29, 2009)

Pluto said:


> that's a fine chart. And if you add a major index and BRK to the comparison over a longer time frame it would show why buying the banks is a very good plan.


Unfortuneately, it only shows that buying the banks WAS a good plan.


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## Toronto.gal (Jan 8, 2010)

My Own Advisor said:


> That's like saying you need to own what *you consume*, some investors think this way. i.e., Enbridge (for heat), JNJ (for healthcare products), utility stocks (for hydro), oil stocks (to run your car), the list goes on...


It's about the % of consumers & sales figures.


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## Toronto.gal (Jan 8, 2010)

gibor said:


> and if I hold *LMT,* I should hold bombers and figher planes?!


It's about understanding the world around you. :frown:


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## Pluto (Sep 12, 2013)

OptsyEagle said:


> Unfortuneately, it only shows that buying the banks WAS a good plan.


yes, it only show history with certainty. However, nothing substantial has changed to make the future look different. Apparently Buffett dug up some old glowing article about KO written in the 30's or some long time ago. The same article could have been written in the 80's. He had faith that would continue in the future...maybe faith is too strong a word - there was just no reason to think things would be different in the future. So they bought almost 10% of the company. Dominant company, good honest management, a business that will be around in 100 years, etc. Criteria mostly applies to our banks. these are mainly good new companies. I think it is good to buy companies with a tradition of good news. there is an occasional fly in the soup, but its pretty rare.


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## pastorash (Feb 3, 2014)

Excellent thoughts all around, appreciated all the wisdom and the caution. I bought a number of stocks over the last few months to build my dividend portfolio, but didn't feel the banks at that time were good buys. Waiting for some money and with luck the valuations for at least one of the Cdn. banks will be attractive enough to purchase sometime in 2015 when I have enough capital to make another purchase.

I kind of like the "whichever bank is hated the most" strategy, sounds simple enough for me!


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## fatcat (Nov 11, 2009)

there is a reason just about every portfolio manager and asset manager in the world is way overweight in financials ...


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## christinad (Apr 30, 2013)

fatcat said:


> there is a reason just about every portfolio manager and asset manager in the world is way overweight in financials ...


This is a stupid question, but I have never bought a stock before. I thought I'd buy one bank stock but when I look at the codes I don't know what to buy. Is there a less abrieviated version? Td has 4 codes listed at waterhouse. Cibc had a few.


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## GoldStone (Mar 6, 2011)

christinad said:


> This is a stupid question, but I have never bought a stock before. I thought I'd buy one bank stock but when I look at the codes I don't know what to buy. Is there a less abrieviated version? Td has 4 codes listed at waterhouse. Cibc had a few.


BMO
BNS
CM
NA
RY
TD

The rest are preferred shares.


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## christinad (Apr 30, 2013)

Thanks Goldstone,

It's confusing because they don't even list td when you do a symbol lookup. I'm learning.


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