Monthly Archives: June 2017

June’s Pick

If you like having options you are going to LOVE this month’s entry. We’re actually suggesting three stocks because we think they are all great choices. In no particular order they are: CIBC, IBM, and BMO.

Canadian Imperial Bank of Commerce (TSE: CM) continues to offer great value to investors again this month. This will make the fourth time CIBC is our top pick and the reasons we like it haven’t changed. The stock is still nearly 13% below its 52-week high with EPS (12.01) larger than P/E (8.78). We’ve pointed out before how remarkable it is for a stock to have EPS greater than P/E and only three or four of the nearly 200 stocks we follow enjoy that distinction. CIBC offers all that and a dividend rate of 4.82%. In a highly regulated and stable banking environment, this stock is a no-brainer.

Choice number two is International Business Machines (NYSE: IBM). When Warren Buffet sold a third of his position in IBM a few weeks investors responded by selling their shares and the stock price tumbled about 6% almost overnight. We see things differently. While he sold a third of his shares, he kept two thirds! What does that tell you? The stock is now trading about 16% below the 52-week high which signals a buying opportunity for us. The EPS (12.17) and P/E (12.56) are both very attractive values and the stock pays a 3.9% dividend to boot! Speaking of dividends, let’s look at the dividend of this stock over the last few years. In 2012 it was $0.85. In 2013 it was $0.95. 2014? $1.10. 2015? $1.30. In 2016 it was $1.40. It’s currently $1.50. Anybody notice a trend? That’s a 76% increase in 5 years! By the way, you can look back through more than 20 years of regular increases (it was 6 cents a share in 1993).

Our third choice is another Canadian bank: Bank of Montreal (TSE:BMO). We like this stock for pretty much the same reasons as we like CIBC. The stock is more than 12% off the 52-week high which is a significant discount for a very safe stock. The P/E of 11.47, EPS of 7.95 and dividend rate of 3.95% round out the attractive features of the stock. Do we really need to say more?

The lower P/E and higher dividend rate mean we will officially recommend CIBC but, to be honest, you’d do well buying any of these three.