By J. Royden Ward
, Editor of Cabot Benjamin Graham Value Letter
From Cabot Wealth Advisory 2/28/13 Sign up for free Cabot Wealth Advisory e-newslette
In my opinion, many exceptional buying opportunities now exist and investors should buy undervalued Canadian stocks. I screened my Benjamin Graham Database to find Canadian companies with rapidly growing earnings and strong balance sheets.
In my opinion, this company offers outstanding appreciation potential during the next one to two years.
Royal Bank of Canada (RY)
, founded in 1864 in Toronto and also know as RBC, is the fifth largest financial institution in North America and the largest bank in Canada. RBC offers all types of banking and investment services to individuals and businesses through its 1,700 branch offices in Canada and 400 branches in 30 foreign countries.
RBC recently sold its 420 U.S. branches and its U.S. banking network to PNC for $3.5 billion. The sale will enable RBC to expand its Canadian operations and to make strategic acquisitions at home and abroad. Indeed, RBC purchased the remaining 50% ownership in RBC Dexia Investor Services for $1 billion. Royal Bank also bought part of the wealth management division of Royal Bank of Scotland. Finally, RBC will acquire the Canadian auto finance and deposit business of Ally Financial for about $3.5 billion.
Revenues increased 12% and EPS advanced 15%, beating my forecast for the quarter ended 10/31/12. Royal Bank produced solid growth across all of its Canadian banking businesses. The company will report its next quarterly results today. If you would like my summary of the new results, just reply to this email and I will send the results to you.
The healthy Canadian economy will help Royal Bank to register an EPS increase of 6% during the 12 months ending 10/31/13. At 11.8 times my EPS forecast of 5.27, RY shares are undervalued. The recently increased dividend now provides shareholders with a generous yield of 4.0%. The high yield and strong balance sheet will limit stock price erosion.
I will continue to follow Royal Bank of Canada and other Canadian companies in my Cabot Benjamin Graham Value Letter. My April issue will focus on six new undervalued Canadian stocks.
Editors Note: You can find additional stocks selling at bargain prices in the Cabot Benjamin Graham Value Letter. In every issue, you’ll find my legendary Maximum Buy and Minimum Sell Prices for over 250 stocks. Click here to get started today!