Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Why I Like Bank of America


I would still like it to unlock its full value potential and trade in the teens by 2014.

At Buy & Hedge, we rarely take stock positions. We favor ETFs and broad indexes. We like indexes we can hedge. But occasionally, we take a stock position when the value looks too good to pass up. That was the case with Bank of America (BAC) when it traded around $6 to $7 in 2011.

I went on radio and TV and recommended it. (Full disclosure: I still own it and so do our clients.) So, some people have asked me, with the pull back in financials since the JPMorgan blow up: Do you still like Bank of America?

The answer is yes. My target on the stock was a long-term target (i.e., three years+). I would still like it to unlock its full value potential and trade in the teens by 2014.

The chart below that I found on The Wall Street Journal just makes me feel even better about it. It trades at the biggest discount to book value compared to its peers. That discount is significant.

Some would look at this chart and contend: Bank of America's book value is the most misrepresented on that list because of its significant mortgage exposure. My answer is: So what if they are wrong by 50%? In other words, what if the real book value is half of what it is reported as because of the real value of the assets on their book. That means the price-to-book value would be 0.74 instead of 0.37.

That still puts them in line with peers. To me, that is a reasonable cushion that I can invest in. Plus, I doubt the book value is off by a factor of 50%. So, I continue to like the investment – though it may be a painful couple of months!

Editor's Note: For more from Wayne Ferbert, go to Buy & Hedge ETF Strategies.
< Previous
  • 1
Next >
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.
Featured Videos