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Looking for Great Bank Stocks to Buy? Look North.

Canadian banks are positioned for solid returns


I am very much a numbers guy. I prefer to focus on what the numbers are saying and ignore all the news and stories swirling around Wall Street on any given day.

Using numbers to help parse the stories helps me avoid getting caught up in the moment and investing in the wrong stocks at the wrong time. Focusing on the numbers also helps me spot the things that the most people are overlooking — things that can make us money by identifying great stocks to buy.

While reviewing the numbers earlier this week I noticed that the Canadian bank stocks were all highly rated by Portfolio Grader — let’s take a look and identify a few winners.

Canadian banking regulations are stricter than most of the world — which is why they came through the recent credit and banking crisis in far better shape than most of the world. In fact, Canada was the only G7 nation that did not have to bail out its banks as a result of the meltdown in global markets. As U.S. and global banks are pulling back their operations, Canadian banks are in a position to expand their operation … particularly in their neighbor to the south.

Bank of Montreal (BMO) is the eighth-largest bank in North America. Here in the U.S. it operates primarily through its Chicago-based subsidiary BMO Harris. The bank also has broker-dealer operation in both Canada and the United States. Bank of Montreal has posted four consecutive earnings surprises and analysts have been increasing their estimates for the bank stock recently.

The outstanding fundamentals and continued improvement have been noticed by Portfolio Grader; last month the bank stock was raised to a “strong buy.” BMO stock should appeal to income investors as the shares yield 3.78% at the current price.

Royal Bank of Canada (RY) is the largest bank in Canada in terms of both assets and market capitalization. In addition to core banking operations Royal Bank of Canada is also active in capital markets, wealth management and insurance. Subsidiary RBC Dain Rauscher is the seventh-largest full service securities firm in the United States — so it already has a solid foothold south of the border.

Analysts have been steadily raising their estimates for both the rest of 2014 and 2015 as business just continues to improve. Portfolio Grader upgraded the bank stock to an “A” earlier this month. Royal Bank of Canada shares are a “strong buy” at the current price. RY stock also has a strong dividend yield at the current price with payout of 3.7%.

Toronto Dominion Bank (TD) has already started to use its superior fundamental condition to expand its operations. Last year TD purchased the private-label credit card business of HSBC. TD also owns a significant stake in discount broker TD Ameritrade here in the U.S. In addition to banking and investment services, Toronto Dominion also offers insurance products in both Canada and the United Sates.

Analysts have been raising their estimates for the bank for full year 2014 and 2015 as conditions continue to improve. The solid condition and results of Toronto Dominion didn’t go unnoticed by Portfolio Grader. The bank stock was upgraded to an “A” back in May and remains a “strong buy” at the current price.

Focusing on the numbers not only helps us avoid all the hype and bad tips, it also helps us uncover the trends and developments in the market that can make us money going forward.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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