In October 2018, we launched the Hamilton Capital Canadian Bank Variable-Weight ETF (ticker: HCB), which seeks to benefit from the historical mean reversion tendencies of the Big-6 banks, especially in times of greater market volatility. At the end of each month, the three most oversold banks are rebalanced to represent ~80% of HCB, while the three most overbought banks are rebalanced to 20%. HCB’s objective is…
Insights: Canada
Cdn/Aust’n Banks: Why the Big Housing Short is So Difficult (and the Risk of a “Direct Hit” Remains Low)
In Q4 2018, we expanded our ETF offering to include two ETFs with monthly distributions and exposure to two world-class – and very similar – financial sectors with excellent performance histories. In October, we launched the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), a rules-based strategy that seeks to capitalize on the historical mean reversion tendencies of the Canadian banking sector[1]. In December, we launched the…
Canadian Banks: Five Takeaways from BBT/STI, Accelerating U.S. Bank M&A
Last week, in our insight “U.S. Bank M&A: Implications of the Largest Deal in a Decade”, we explained why we expect U.S. bank consolidation will accelerate following the BB&T/SunTrust merger, and reasons why such activity will predominately be within the small and mid-cap banks. In this insight, we offer five takeaways for the Canadian banks – BMO, CM, RY, and TD – and their U.S. expansion…
Pref ETFs Falter (Again): Why HFA/HCB are Logical Switch Candidates for Monthly Income
Following our October launch of the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), today we launched the Hamilton Capital Australian Financials Yield ETF (HFA). Both of these ETFs pay monthly dividends. HFA seeks to generate a yield of 6.5% or higher from a portfolio of higher dividend-paying Australian financials operating in arguably the world’s strongest and safest financial sector (aided by covered calls). Of note, the…
Dividend-Heavy Australian Financials: History of Outperformance vs. Canadian Peers
All Canadian bank investors know that the sector has experienced very good performance over the past ten to fifteen years. However, most are less familiar with Australia, which actually has a history of long-term outperformance relative to the Canadian financials, with virtually identical volatility. Interestingly, as a testament to the strength of the Australian financial sector, its banks even outperformed the Canadian banks during the global…
HCB: A New Strategy for Bank Investors (Wealth Professional Article)
Wealth Professional interviewed Rob Wessel, Managing Partner at Hamilton Capital, following the launch of the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB). The interview covers mean reversion trends and how they are incorporated into HCB, how the strategy might lower risk in period of market turbulence. Click here to read more.
Globe & Mail on HCB: Unique Canadian Bank ETF
The Globe & Mail was quick to cover our latest ETF, the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB), launched on October 1, 2018. The article explains how a mean-reversion strategy can offer long-term performance and reduced risk, referencing 3rd party backtesting of an almost identical strategy. HCB offers Canadian investors a smart mean-reversion approach to owning Canada’s “Big Six” banks, in a convenient, low-fee ETF.…
Canadian Banks: Mean-Reversion Strategy for Higher Returns/Lower Risk
On October 2nd, 2018, Hamilton Capital will be launching the Hamilton Capital Canadian Bank Variable-Weight ETF (HCB). This ETF will consist of the Big-6 Canadian banks, rebalanced monthly to capitalize on the long-term mean reversion tendencies of the sector. Specifically, it will overweight the three most oversold banks from the prior month (to ~80%) and underweight the three most overbought banks (to ~20%). Please note: The…
Canadian Western Bank as a U.S. Mid-Cap Proxy
Canadian Western Bank has achieved highly material long-term outperformance versus its larger peers. In this post, we relate its sizeable outperformance to our preference for U.S. mid-cap banks. In our January 24, 2018 comment, “U.S. Banks: High/Low Growth Areas in One Map (i.e., ‘Follow the Sun’)”, we explained that there are vast demographic differences within the six distinct geographic regions of the United States (five of…
CIBC: On PVTB, Why We Agree with the Higher Bid (and Two Reasons Why it Should Not be Raised Further)
In this ETF Comment, we: (a) explain why we agree with CIBC’s decision to increase its bid for PVTB, and (b) provide two reasons why the bank should walk away from their bid, if this new price is not accepted.
Canadian Banks: Why U.S. Mid-Caps are Easier to Acquire (than 10 Years Ago)
In the Hamilton Capital Global Bank ETF (HBG; TSX), we generally seek to hold 50% North American banks, with an emphasis on the ~200 publicly traded U.S. mid-cap banks (those firms with <$100 bln in assets). As of the time of writing, HBG had exposure to 23 U.S. banks representing 43% of the ETF’s net asset value.
Canadian Banks: Revisiting our “End of an Era” Thesis (Five Years Later)
In May 2011, we wrote an essay entitled “The Canadian Banks – The End of an Era”. In this essay – which was excerpted in the Globe and Mail – we explained why the Canadian banks were entering a period in which their two-decade period of double digit EPS/dividend growth was ending. Specifically, we identified three reasons supporting this thesis: (i) the drivers of the sector’s…