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These 2 Bank Stocks Are Screaming Buys Today

Sometimes I’ll see investors search far and wide for the best investing idea, turning over all sorts of proverbial rocks to find the best opportunities.

Some folks even wear this as a badge of honour, as if there are bonus points for how obscure an investment is. They want to own some tiny oil company operating in Africa. It brings them pride.

But I’ve come to realize something over the years: investing is all about making money. The best money-making ideas are generally right in front of you, in plain view, and known by most of the market. These folks are just letting short-term fear cloud their judgement.

Take the Canadian banks, for instance. Here we have a group of stocks that has sold off lately on somewhat lacklustre quarterly results, falling to pretty cheap valuations. You could get caught up in short-term issues like slowing mortgage originations or increasing loan losses, or you could look at the long term and see the obvious: today is a great buying opportunity.

Let’s take a closer look at two of the more attractive bank stocks today. I’ve recently been adding to these two names in my portfolio. You should probably join me.

CIBC

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) recently released its second-quarter results, and the stock took a dive. Shares are down almost 9% since that fateful day.

At first glance, the numbers didn’t look so bad. Net earnings came in at $2.95 per share, a slight increase versus last year’s number of $2.89 per share. Adjusted profit came in at $2.97 per share for the quarter, which was a hair under analyst expectations of $2.99 per share.

Yes, the stock missed expectations by less than 1%, yet shares are down nearly 9%. How does that make sense?

Some analysts ratcheted down their earnings expectations for the year, but the consensus estimate is that CIBC will still earn $12.13 per share this year. As I type this, shares of Canada’s fifth-largest bank trade hands at $103.22. That gives the stock a forward P/E ratio of just 8.5, which is ridiculously cheap.

CIBC shares are also cheap on a price-to-book value perspective, trading hands at just 1.3 times book. Normally that ratio is closer to 1.5 times book value and can even creep higher when shares get a little expensive.

I can’t predict when shares will recover, but investors shouldn’t mind the wait. CIBC pays one of Canada’s best dividends — a 5.4% yield that’s the perfect consolation prize.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has suffered from the same short-term issues as CIBC. The company came out with lacklustre Q2 earnings and the stock fell as a result. Shares are down more than 5% over the last month.

Scotiabank posted recent adjusted earnings of $1.70 per share, which narrowly missed analyst expectations of $1.74 per share. The reason for the lacklustre results was the company increasing its loan-loss reserves. It put aside $688 million to cover doubtful loans in its last quarter — a big increase versus the $534 million put aside in the same quarter last year.

Investors are quick to focus on the Canadian results, ignoring the excellent growth being posted from the company’s Latin American division. International revenues soared in Q2, increasing 22% on the back of several big acquisitions and organic growth. Adjusted net income from Latin America hit $700 million, increasing 14%. These are solid results the market is ignoring because investors are too focused on Canadian numbers.

Scotiabank shares are also trading at an attractive forward valuation, checking in at just 9.7 times analyst expectations for 2019. And like with CIBC, you get a great dividend as a consolation prize while waiting for shares to cooperate. Shares yield 4.9% with a stellar history of dividend growth.

The bottom line

You could search the farthest corners of the financial world for investing ideas, or keep it simple. I vote for the latter. Some of Canada’s banks are ridiculously cheap right now. Just buy them up, already. You won’t regret it.

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Fool contributor Nelson Smith owns shares of BANK OF NOVA SCOTIA and CANADIAN IMPERIAL BANK OF COMMERCE. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

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