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This Canadian Bank Stock Is Crushing U.S. Banks

If you’re looking to make money in financials, you may need to look beyond our borders right now. You’ll find one Canadian bank stock that’s on a tear.

When Donald Trump won the U.S. presidential election, bank stocks got an instant boost. Now, that seems like a distant memory, as U.S. financials have been running in place all year. For big returns in the financial sector, it might be time to look outside the U.S. border. You won’t have to look very far: there’s a Canadian bank stock that’s up nearly 15% year to date.

BAM: Canadian Bank Stock on a Tear

Technically, it’s an asset management company. It’s called Brookfield Asset Management Inc. (BAM), a Toronto-based firm that manages approximately $250 billion in global assets. Brookfield’s investment history dates back to the 1800s, when it helped launch Brazil’s first electrical and transport utility. BAM stock has been listed on the Toronto Stock Exchange since 1912.

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BAM has been one of the fastest-growing Canadian stocks of the 21st century, going from 2 in 2000 to new all-time highs above 38 last month. After touching those highs, BAM promptly retreated to 36, but is now back on the upswing, trading just under 38. The stock has traded above its 50-day moving average virtually all year.

Brookfield Asset Management (BAM) is one Canadian bank stock that's crushing U.S. financials.

Compare BAM’s performance to that of the Financial Select Sector SPDR Fund (XLF), an ETF that tracks the price of some of America’s largest financial institutions and thus acts as a proxy for the U.S. banking industry. It’s up just 1.4% so far this year, a disappointing performance on the heels of a 14% spike in the week that followed Trump’s election. Back then, investors were piling into U.S. financials based largely on Trump’s bank-friendly campaign promises of deregulation and tax reform. Those policies were the primary thing that drove financials after Trump was elected. But with nothing concrete being put forth in Trump’s first four-plus months on the job, the excitement has dwindled, at least for now.

Meanwhile, Brookfield Asset Management grew sales by more than 20% in 2016, its best year-over-year growth rate in four years. None of the six largest U.S. banks grew sales by more than 2.5% last year. Brookfield’s sales growth is expected to slow to a crawl in the coming quarters, but current-quarter profits are expected to improve more than 73%. For those reasons, BAM is a Canadian bank stock with plenty of momentum.

At a time when most Canadian stocks have been treading water, BAM’s performance stands out. And with few U.S. financial stocks making hay, BAM is an intriguing alternative.

Asset Management Firms Thriving

That’s not to say there are no opportunities in the U.S. financial sector at the moment. Several American-based asset management firms are rolling: Blackstone Group (BX) is up more than 24% in 2017, KKR and Co. (KKR) has advanced more than 20%, Ameriprise Financial (AMP) has risen 11.5%, to name a few. If you’re looking to make money in financial stocks, asset management firms appear to be the place to do it right now.

In the meantime, the fate of traditional bank stocks could be tethered to Trump’s policies, at least to a degree. If banks start to improve their top- and bottom-line growth, that would help too.

But it’s best not to invest on “ifs.” With Brookfield Asset Management, the growth is already in place, and the stock is reacting accordingly.


Chris Preston is Cabot Wealth Network’s Vice President of Content and Chief Analyst of Cabot Stock of the Week and Cabot Value Investor .