Bank Of America: Is It Time To Be A Core Holding?

Feb.29.12 | About: Bank of (BAC)

I have been holding Bank of America (NYSE:BAC) shares in my risk basket, outside of my core portfolio, and have been trading shares within that basket as I outlined in a previous article. (Read this)

Subsequently, I wrote an article which outlined some very positive steps taken by BAC and its CEO Moynihan. (Check this out) Soon after that article was published BAC received a favorable court ruling (read this) which when upheld will once again aid BAC in finally cleaning up its balance sheet.

I realize that there are political arguments and resentment that causes BAC to have become the most hated "Bank IN America", however the sole purpose as an investor should be to profit from what the markets give us, to the best of our ability.

The Basics

Bank of America Corporation (<a href='' title='Bank of America Corporation'>BAC</a>)

BAC: Current Price: $8.13/share, Dividend: .50%, ESS Rating: Neutral

Ok, so everyone hates BAC. Analysts, homeowners, credit card holders, mortgage holders, even "people" on Jupiter have been complaining! Yes they took a bail out, yes they owe taxpayers money, yes they don't deserve to have any parties thrown for them, and YES BAC stock might be great for our core portfolio at this point.

Buy it, hold it, and add to it on the dips. That is my opinion right now.

They have come through the other side of the storm and the share price has been holding up well since it bounced back from under $5.00/share.

They even are giving a tiny dividend. Nothing amazing, but it is a start.

As this CNBC report (full report here) also states about recent actions;

"Credit Suisse analyst Moshe Orenbuch said the decision was "a positive for Bank of America in that the settlement is more likely to be finalized according to its original terms," which were arrived at last June.

Since the settlement was "structured under New York State law," Bank of America can settle with the entire trust, rather than with individual investors. Bank of New York Mellon (NYSE:BK) is the trustee that agreed to the original $8.5 billion settlement.

Assuming the settlement is finalized, one more piece of Bank of America's mortgage puzzle will be solved, and since the company already set aside the settlement money last June, it is baked into the share price."

With all the hate out there, and with the positive occurrences and actions of BAC, I think it has created a "perfect storm" of sorts and a contrarian's delight. It must be time to buy, right?

My Opinion

As a contrarian and fellow reader of tea leaves, I believe that BAC could offer our core portfolio some added zip. With the tax increases on the horizon, having a common stock that is a value play could energize our overall portfolio value.

It might be time to stop hating BAC, but if you do, at least lets try to make some money by owning shares.

I see a potential double or more in 12-24 months.

Your thoughts?

Disclosure: I am long BAC.

Disclaimer: Please remember to do your own research prior to making any investment decisions. This article is not a recommendation to buy or sell any securities or stocks, and is the opinion of the author.