Bank of America (BAC)

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.

There is a chance that this could have rapid earnings growth because it is coming from such a low base. It may do quite well. Wouldn’t be one of his top picks in the US banks. If his thesis on US housing is correct, all the big US banks will benefit. Prefers Wells Fargo (WFC-N), which is a more direct play on US housing. This one is more of a recovery play so if you believe in a strong US recovery, you will make more money on this one. He prefers buying for the long-term.

Internationally it might have some trouble with its overseas operations. Domestically they will do well if the housing market continues to strengthen. Would look at some of the safer names such as a Wells Fargo (WFC-N) or Goldman Sachs (GS-N).

BV is $20 and the tangible BV is $14 so it is trading below Book. People don’t like the guy running the company that much but he has done a very good job changing the company. He is making it a better company, a smaller company and cutting out costs. In the next 5 years, they are bringing down costs. The key to this story is that loan-loss reserves are coming down in the US and loan losses are coming down. US housing market is healing itself. Owns 10% of all the deposits in the US.