Opinions
Patrick Horan
Bank of America
BAC-N
BUY
Jul 20, 2015
Stock price when the opinion was issued
You might be interested:
The "too big to fail" banks have had strong recent earnings. US economy is doing quite well right now, benefiting from lots of tailwinds, new US president is pro-business. This position makes sense.
Whether to trim is more a question of portfolio weighting. Look at the money in your overall portfolio and in BAC specifically. If that position is over 5%, or 7% on its way to 10%, then maybe trim down to 2-3%. That way, if things reverse and the price comes down, it won't have an impact on your overall portfolio.
Loves the money-centre banks. Not quite as expensive as JPM, but more interest-rate sensitive. A gently falling interest-rate environment (which he thinks will come to pass, though it's up for debate), net interest margins will widen and that's traditionally good for banks. Capital markets business has really built up, and will open up post-Biden. Economy in pretty good shape. Undemanding valuation. Yield is 2.3%.
(Analysts’ price target is $52.46)If the US consumer struggles and can't buy goods and job losses rise due to tariffs, this will slow down the economy and directly impact banks like BAC. It's hard to know where tariffs are going. The dividend is high and BAC has a good, long track record. Best to collect the dividend and wait.
Financial sector offers great promise, though it's reacted to current markets by pricing in a potential recession. Slower economic growth would not be good for banks. Absent a recession, with consumer confidence returning and unleashing M&A, the sector provides a good opportunity.
A less expensive choice further down the food chain from the likes of JPM.
Likes TD a lot. Very undervalued at 10x PE. Potential for multiple to rerate in medium term. More upside as it distances itself from the overhang of regulatory infractions. All that should give you a better total return. He'd pick TD.
For BAC, even with deregulation in US, the big banks are already so large, it's hard to imagine they'd be allowed to get even bigger.
Predisposed positively to this bank. US financials got hit with uncertainty, liability and lawsuits about 5 years ago. They had to build their reserves because they had issues with how much they could affect the US economy going forward. We are now just starting to get to the good part where the yield curve is rising and capital markets are responding better.