It is no secret that I love Canadian bank stocks and I believe in their long-term growth and success due to their lack of competition and the protection that the Canadian government provides them from any meaningful competition.
Convergence Meets Divergence
It is interesting to note that when things are going well these Canadian banks tend to be highly correlated and almost mirror each other. However, when things go “south” (no pun intended on the United States sub-prime fiasco) this is where we see the “stones sink to the bottom”.
My favorite of the Canadian Banks, Scotiabank (BNS), has held up reasonably well compared to the peer group. However, CIBC (CM) has been throttled to the tune of -28.67% over the past 6 months…mostly due to sub-prime exposure.
So what is our strategy?
There have been proponents in recent years that tell us to buy the highest yielding Canadian Bank stock because of the significant correlation of the sector. However, when the “eggs are on sale”, we might want to buy the best!
If you are looking to increase your position in a Canadian Bank stock, I would highly suggest researching BNS or TD at this point in time.
What stocks are on your radar right now?