An Amazing Investment Opportunity North of the Border?

By: Dennis Biray
Submitted: 2007-01-17 16:17:39
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As my articles typically contain equities that both manufacture and obtain most of their earnings in the United States, by some careful examination, I have found an amazing investing opportunity north of the border that is too lucrative to pass up. By purchasing shares of this company, not only will you, as an investor, expect to receive long term growth appreciation to your capital, but solid short term returns as well.

To continue the suspense a little longer, it is clear that investment banks typically perform at amazing levels relative to any other sector for reasons obvious to many. Since they are the master chiefs who deal with IPOs, earning predictions, and overall high information which affect all the markets on a day-to-day basis, it should be expected that investing in a bank, regardless the price, is already an excellent investment. However, when looking at American based banks such as Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns, only Bear Stearns have accumulated the same amount of capital gains, percentage wise, when compared to banks situated in Canada. While looking at these Canadian based banks such as Canadian Imperial Bank of Commerce (CM), Toronto Dominion (TD), Royal Bank of Canada (RY), and Bank of Nova Scotia (BNS), each one of these firms have had close to 150% growth in terms of share price over the past five years.

Now you may ask if there is a difference between purchasing one stock over the other to obtain maximum gains. The answer to the question is more than likely no. To be honest each one has very similar fundamentals, and the process of choosing which one to purchase should rely on previous knowledge, preferences, or other information that can be valuable to the inclination of the share price. In terms of what I would purchase can be attributed to Canadian Imperial Bank of Commerce. I choose such a firm, not because it has significant advantages over TD or the Bank of Nova Scotia, but because of more nitpicky details. For example, while most all of the other banks have a P/E ratio in the 10-20 range, looking at CM, the P/E is at an amazing rate of only 1.47. There are not many other stocks in the market where you can find such a ratio in any industry. Thus, what this low ratio means is that CM constantly produces earnings at such a high number that it becomes undervalued in terms of share price of what it actually should be. When this happens, there is a strong possibility that this stock will skyrocket to become close to its estimated real value. In addition to that, CM supports pretty solid earnings as all banks typically do with a strong margin percentage growth from last year to now. While many analysts have labeled this stock as a sell more than a buy, I believe that’s because the stock is near its record high. However, if technical analysis does not fail us, then the upward trend that has been experienced throughout CM’s tenure should continue to provide optimistic results and a strong opportunity for strong capital gains.

Ergo, while picking any of these Canadian banking stocks will yield excellent results, even compared to their American equivalents, I believe that the best of the best can be attributed to Canadian Imperial Bank of Commerce. Even if there is a slowdown in the share price growth over the next few months as the American economy goes into recession, that does not mean the Canadian economy will go through one of the same magnitude if any at all, and thus such evidence provides even more beneficial optimism to purchase any one of these stocks north of the border. Purchasing shares of CM, TD, or other Canadian banking stocks may not yield tremendous capital gains right away, but come another five years, you should definitely expect to see a wonderful rise in terms of share price.

Article source: Expert Articles