Gavin Graham
Merrill Lynch & Co (US)
MER-N
COMMENT
Sep 17, 2008
Being acquired by Bank of America (BAC-N) through shares. If you own, take the shares. In a couple of years, it will be higher and in the meantime you'll get a decent yield.
He has a model price of $86.44, a 60.5% positive differential. They finally have a CEO, which is good news. Financial CEO’s are being replaced by Risk Managers, so going forward they will be building their balance sheets.
A great financial at a discounted price. Made some mistakes. Got into the mortgage related businesses to deeply and are now paying the penalty. Cheap at 1.5X Book.
Got rid of their CEO who they replaced with a man that used to run the NYSE. You'll have to wait till these things bottom out. You can start buying them slowly.
On a price to book basis got down to the level that it bottomed to in 1998. The big question that is overhanging everybody's mind is, what is the integrity of their balance sheet like. Thinks there is going to be a bloody battle on legal grounds.
This whole sector is dangerous. Its saviour is eventual U.S commercial bank transition to Canadian form (Citigroup owns big brokerage firm) There is further downside.