The company has a large presence in the US so as the economy starts to recover itself this bargain priced bank is bound to grow with it.
The intrinsic value of the stock hasn’t gone down nearly as much as it is worth. The company has a book value per share of $20 and in early March 2012 they passed the Fed’s stress tests. The stress test demonstrated that the company has enough capital to survive another economic downturn and with this capital is earnings potential for the company.
Bank of America has been involved in some huge cost cutting operations of late as well as an effort to raise additional capital and dispose of non-core business aspects. Its focus has been to lower expenses and become a leaner operation.
Now (March 2012) in addition to cutting costs they want to make a profit and this may mean more charges which will irk customers.
BAC has also had its fill of legal battles since ‘09, some of which resulted in a decent loss of cash, but it seems to have most of this behind it, and that is reason for hope.
BAC has a few scary financials with the main one being that debt exceeds total cash by $100 billion. However this is offset somewhat by the book value of $20. Though with BAC planning to write down 200,000 mortgages currently (March 2012) facing foreclosure, this number may go down - but unless there are more drastic write downs coming soon it is likely that book value will stay above the stock price for the time being which is often a signal to think about buying in.
They have not been focused on giving out meager dividends to satisfy investors but instead have put this money back into the company to help get the debt off of their back. It is better to have a more solid financial foundation which causes it to go up by 5-10% than get a 1% dividend.
BAC has also been focusing on operations in the US which has allowed it to be protected somewhat from recent European debt related price declines.
BAC has wide exposure to a number of liabilities and if the economy takes a turn for the worse again they will be on a slippery slope. However with the economy going to keep headed up (March 2012 & Beyond) for a while and that Europe ’s situation is stabilized for the time being, BAC’s debt may not be the biggest worry.
Yet despite its reputation decrease, Bank of America still has massive assets in the United States and it seems to be making a turnaround. The US economy, at least for the time being (March 2012), seems to be on recovery track, and as the economy goes up it is likely that BAC will follow.
At US$10.00, the questions remain about whether the bank can grow earnings at a sufficient clip to sustain the rally.
Annual earnings growth of 9.78% over the next 15 years (2012 & Beyond) is already priced into the shares of Bank of America.
Bank of America has been shrinking and selling off assets in order to bolster its balance sheet against housing-related shocks. While those efforts have reassured investors and regulators that Bank of America can survive without significant new equity issuance, there are still doubts about the bank's earnings strength.
If Bank of America sees a "faster than anticipated" wind down of its legacy mortgage portfolio and credit metrics continue to improve, the shares would be worth much more than now (US$10.00). However, if housing declines another 10-15% and mortgage losses are worse than expected, Bank of America shares could return to the $5 mark.
Bank of America is likely to get some help, however, if long-term Treasury rates sustain their March 2012 rise.
The intrinsic value of the stock hasn’t gone down nearly as much as it is worth. The company has a book value per share of $20 and in early March 2012 they passed the Fed’s stress tests. The stress test demonstrated that the company has enough capital to survive another economic downturn and with this capital is earnings potential for the company.
Bank of America has been involved in some huge cost cutting operations of late as well as an effort to raise additional capital and dispose of non-core business aspects. Its focus has been to lower expenses and become a leaner operation.
Now (March 2012) in addition to cutting costs they want to make a profit and this may mean more charges which will irk customers.
BAC has also had its fill of legal battles since ‘09, some of which resulted in a decent loss of cash, but it seems to have most of this behind it, and that is reason for hope.
BAC has a few scary financials with the main one being that debt exceeds total cash by $100 billion. However this is offset somewhat by the book value of $20. Though with BAC planning to write down 200,000 mortgages currently (March 2012) facing foreclosure, this number may go down - but unless there are more drastic write downs coming soon it is likely that book value will stay above the stock price for the time being which is often a signal to think about buying in.
They have not been focused on giving out meager dividends to satisfy investors but instead have put this money back into the company to help get the debt off of their back. It is better to have a more solid financial foundation which causes it to go up by 5-10% than get a 1% dividend.
BAC has also been focusing on operations in the US which has allowed it to be protected somewhat from recent European debt related price declines.
BAC has wide exposure to a number of liabilities and if the economy takes a turn for the worse again they will be on a slippery slope. However with the economy going to keep headed up (March 2012 & Beyond) for a while and that Europe ’s situation is stabilized for the time being, BAC’s debt may not be the biggest worry.
Yet despite its reputation decrease, Bank of America still has massive assets in the United States and it seems to be making a turnaround. The US economy, at least for the time being (March 2012), seems to be on recovery track, and as the economy goes up it is likely that BAC will follow.
At US$10.00, the questions remain about whether the bank can grow earnings at a sufficient clip to sustain the rally.
Annual earnings growth of 9.78% over the next 15 years (2012 & Beyond) is already priced into the shares of Bank of America.
Bank of America has been shrinking and selling off assets in order to bolster its balance sheet against housing-related shocks. While those efforts have reassured investors and regulators that Bank of America can survive without significant new equity issuance, there are still doubts about the bank's earnings strength.
If Bank of America sees a "faster than anticipated" wind down of its legacy mortgage portfolio and credit metrics continue to improve, the shares would be worth much more than now (US$10.00). However, if housing declines another 10-15% and mortgage losses are worse than expected, Bank of America shares could return to the $5 mark.
Bank of America is likely to get some help, however, if long-term Treasury rates sustain their March 2012 rise.
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