Don’t Short the Canadian Banks – Royal Bank of Canada

Summary

  • RY recently reported solid FY2017 results. It does, however, face headwinds which may result in slower growth in 2018.
  • PAA Research in the US recently released a report suggesting that RY faces headwinds which will likely result in a 30 – 40% pullback in its stock price with the potential for a 50% correction.
  • RY has multiple lines of business which reduces earnings volatility. It is an extremely well managed bank and depending on your investor profile, is an ideal long-term investment if your seek dividend growth and capital gains potential.
  • A retracement in stock price to the magnitude suggested by PAA is highly improbable.

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Schedule I Canadian Banks – (part 2 of 6): Royal Bank of Canada Stock Analysis

Summary

  • This Royal Bank of Canada Stock Analysis is the second of a 6 part series covering the Big 6 Canadian Banks.
  • RY reported strong Q2 2017 results May 25th with earnings by business segment and by geography reflecting a marginally greater % from Wealth and the US relative to FYE2016.
  • RY’s Capital Measure Ratios are strong and the bank continues to be very well managed.
  • Pockets of the Canadian real estate market are wildly overheated but RY’s results indicate its real estate related loan portfolio is of sound quality.
  • RY is an attractive long-term investment but I suspect we will experience a major market correction within the next 12 months and urge caution.

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Four Investing Principles to Make Your Money Work for You

In today’s post I would like to highlight the importance of four investing principles to make your money work for you. You must:

  1. Invest in good solid companies;
  2. Practice patience;
  3. Not panic when making investment decisions;
  4. Relish major market corrections as they provide opportunities in which to acquire shares at more reasonable valuations.

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