Bank of America (BAC)

Financials have a period of strength from January to April. This is no different. Outperforming market and above significant averages. But it is overbought and due for an average. Get in at $11.17

US banking is a great story. They are in the sweet spot. Housing market is turning around. All the loans they have made since 2009 are in fantastic shape on their books. They are not going to have loan losses. Cutting their cost structure down and are trading at much lower multiples than they were years ago. Try to get it on a pull back.

It got to the point where it was oversold and he is not sure if that is all it is or is it fundamentals also. We are still faced with the fact there is low loan demand and a flat yield curve. Trading at 65-70% of book value. They have more responsible management now. He would prefer to go up the ladder and look at JP Morgan or Wells Fargo.

Has tremendous potential. They keep getting blindsided by things that come out of the woodwork. He has a target price of over $30.

Not one that he follows closely but feels US banks in general are probably looking good right now and probably offering investors some gains in a year or 2. As the economy improves, their balance sheet improves, their business gets better, and credit risks are lower. Looking at this one.

Valuation of US financials is relatively cheap. Earnings recovery will be stronger particularly with the housing recovery. This one has levered itself a lot more to the housing market. He could see it easily back to $15-$16.

Up 83% over the last 12 months so this has been the massive outperformer. Has to get through the $14-$15 range. Things are improving for the banks. Housing is coming back which is a big part of their business.

If it can get above the $10 level, it could probably go to $12. RSI (relative strength index) is about midpoint. If it can get above $10, you have a great place to put a stop in. To him, this is much more of a trading name than a longer-term investment.

Been in the doghouse for a long time but feels there are better days to come. Trades at about .7X BV compared to most banks that would trade at 2.5 or 3 times BV. Possible dividend increase. Feels the US housing market is healing quite quickly and this bank is one of the largest lenders. Cheap.

BAC has better upside over the long term than JPM-N. But JPM-N is safer.

Great franchise. 10% of deposits in the US. Great businesses inside them. Downside is the Countrywide mortgage business which they will sort out. The US consumer and the US housing markets are turning around and that will really help them. He thinks also that they will cut costs over the next 3-5 years.

Bought a couple of acquisitions. It has been getting harder for investment banks to make money. You need confidence in the economy. In 3-4 years it will be higher but it will be a bumpy ride. There are also regional banks. Compare C-N to this one over 20 years.

Entered into a consolidation phase. Market drop has not affected it too much. We are at a nice high level so we could break out. If the financial situation improves in the US and BAC puts out some positive news, we could see the $14-15 level. Stop is $8.50.

US banks have done a pretty good job of recapitalizing. Doesn’t expect tremendous growth but certainly BAC is a beneficiary to the housing recovery. There may be another round of dividend hikes after the stress tests.

(Top Pick Nov3/11, Up 37.84%) If it gets over $10 then a lot more institutions can buy in. They want to increase the dividend. If economy tanks they will have trouble again.