Our take on Bank of America (BAC)
7-3-07: Some of you requested our opinion on Bank of America (BAC). In our view, BAC at current level of $49 per share would not be a good entry point. This is a slow moving stock; upside potential appears limited. To put it into perspective, it has been almost two years since we last looked at BAC, back then it was trading around $44 per share. In two years, BAC has delivered only $5 of appreciation to shareholders. Despite a healthy dividend payout, this rate of return is unacceptable.
If one is looking for a low risk stock, BAC would be a good one to own. However, do not expect much in return. This is not to say BAC is not a great company. In fact, the company is definitely a leader in its respective sector; the return on investment is however a dissapointment.
Consider Countrywide Financial (CFC) instead if you are looking to get into this sector. BAC was onced rumored to be interested in CFC, but the subprime mess scared them away. We believed CFC will eventually be acquired, if not by BAC, someone else will likely buy the company; perhaps a private equity firm.
Comments
I am actually working at BAC right now and our equity research department is pretty bearish on CFC. When do you think there might be a buyout?
Posted by: Shen | July 3, 2007 08:55 PM
Shen, thanks for your comments. Like any other speculation, we don't know if or when a buyout of CFC may occur (i wish we did). Given BAC has been interested in expanding their mortgage business, a buyout of CFC would make sense.
Nevertheless, CFC is still a good company as a long term investment stock and we believed CFC will out perform BAC.
Posted by: ibooyah | July 5, 2007 02:23 PM
Any thoughts on TASR and CHTR?
Posted by: dazraf | July 10, 2007 05:18 AM