Bank of America (BAC) shares have been in a downtrend and Mad Money host Jim Cramer doesn't appear to be overly positive on the stock stating: “Until the company either replaces management or gets its arms around the total possible exposure to mortgages, it’s just way too hard for those who don’t own it to wade into right now.” Read more of Cramer's thoughts on Bank of America.
However, Bank of America is possibly close to settling a state and federal investigation into foreclosure practices and Bof A agreed to pay $8.5 billion to settle a dispute over Countrywide mortgage bonds. That settlement deal is pending court approval.
As the bank continues to work through challenges and settle pending lawsuits, it should take much of the recent pressure off of the stock. Many smart investors like Donald Trump and Bruce Berkowitz of Fairholme Funds are buying shares at what look to be bargain levels. The stock is trading for just a fraction of the current book value, which is around $20 per share. In regards to BofA, Berkowitz states
"They’re going to make in a more normal period, which they’re getting to, $2+ per share. They will not need the capital in about 12 months’ time. They are already stronger than I’ve even seen them. Balance sheet’s great. The reserves are unbelievable. They’ll probably need another 12 months to get to this over-capital position, which everyone will be forced to, as the pendulum gets to the extreme before it starts to go the other way."
I have to go with Berkowitz and Trump on BofA. While the company has challenges, they are not problems that won't be resolved over time and with good management. Someday, many investors are likely to say "I wish I had bought Bank of America when it was only $7 per share." Here are some key points for BAC:
Current share price: $7.45
The 52-week range is $6.31 to $15.31
Earnings estimates for 2011: loss of 25 cents per share
Earnings estimates for 2012: profit of $1.51 per share
Annual dividend: 4 cents per share, which yields .6%
Data sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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