Bank of America Remains a Strong Buy

By ChartLabPro.com  DEC 13, 2012 1:07 PM

The potential for higher interest rates could push large-cap banks higher.

 


MINYANVILLE ORIGINAL We wanted to provide Minyanville readers with an update on the large-cap banks. We started to get bullish in this group back in August as Bank of America (BAC) moved to a Strong Buy.  We have mentioned this name before, specifically as the best way within the group to leverage a housing recover. Now we have another catalyst that will help push these names higher -- the potential for higher rates.  If the market believes rates have bottomed at this point, the balance sheets of these large banks that are interest rate-sensitive will have expansion in NIM (Net Interest Margin).  One risk, however, is a faster rise in rates than expected where these banks have little time to adjust their loans.  If rates increase gradually, banks will have enough time to take advantage of higher rates and adjust their loans, which will increase profitability.   

At this juncture, we would remain long BAC and financial exposure for a longer-term investment. As you can see from the correlatation chart, these names all have similair correlation and little divergence from one another. For that reason, there is no need to own more than one of these names.




Click to enlarge

 

Click to enlarge


Click to enlarge


Click to enlarge


To learn more about ChartLabPro's algorithm visit www.chartlabpro.com.

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.