Conservative Canadian banking
Unfortunately for much of the financial world, conservative banking practices seemed to be a uniquely Canadian trait going into the global financial meltdown. As many of the largest American and European banks were busy finding new and exciting ways to damage the world economy, the Bank of Montreal (USA) (NYSE:BMO) was busy lending money to credit-worthy individuals and businesses and charging a reasonable interest rate for that service. What a novel and innovative concept!
But the financial world’s pain (especially that of the U.S.) is BMO’s gain. Thanks to the quick recovery to Canadian banks and the sorry state of U.S. financial companies during the immediate aftermath of the global crisis (30 U.S. bank failures in 2008, 148 in 2009, 157 in 2010), the Bank of Montreal (USA) (NYSE:BMO) was able to spread its brand of conservative banking to the United States. Beginning in 2007 with a series of cheap and opportunistic acquisitions, the Bank of Montreal is now the owner of several U.S. regional banks, AIG‘s Canadian life insurance division, Citigroup‘s North American Diners Club credit card franchise and other assets from desperate-to-sell U.S. financial institutions.
With its many recent American acquisitions, the Bank of Montreal (USA) (NYSE:BMO) is well positioned to profit as the American financial sector continue its recovery. Trading at 1.39 times book value however, the Bank of Montreal (USA) (NYSE:BMO) might appear a bit pricy compared to some large U.S. banks, many of which are currently trading below book. But considering this Canadian bank’s history of reliability and consistence (184 years and counting of dividends), it is the financial company I would trust most during a ten year market shut down.
Foolish bottom line
Overreacting to short term events is rarely a successful strategy for making money. While many of us on Aug. 22 were worried about something so incredibly short term as 191 minutes out of a single Thursday afternoon, the Oracle of Omaha was likely relaxing during his lunch break, perfectly content knowing that his stock portfolio was made to survive a ten year market shut down. How did you spend your Thursday afternoon?
The article 3 Stocks for a Buffett Ten Year Market Shut Down originally appeared on Fool.com and is written by Matthew Luke.
Matthew Luke owns shares of Beam. The Motley Fool recommends American International Group, Beam, Diageo plc (NYSE:DEO) (ADR), Energizer Holdings, Johnson & Johnson, and Procter & Gamble. The Motley Fool owns shares of American International Group and Johnson & Johnson and has the following options: long January 2014 $25 calls on American International Group.
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