Why I Bought Bank of America After Last Week's Correction

| About: Bank of (BAC)

During sharp market corrections, I often like to buy high quality, undervalued blue chips that are normally not available at cheap prices. So, I bought some Bank of America (NYSE:BAC) last Friday.

Since the market is so depressed now, I did not write a covered call against BAC, but might do so if it quickly rallies 10% or more. I also have a few other depressed stocks on my watch list, but haven't pulled the trigger yet - (ABK), (NYSE:HD), (NYSE:BAM), (NYSEMKT:PRK), (NASDAQ:SHLD).

Financials have been the weakest sector lately, but if the various credit-related problems get much worse, I think we could see a surprise interest rate cut from the Fed. Also, from a longer term perspective the steepening of the corporate credit curve and higher credit spreads should eventually benefit both banks and brokerage firms.

Some other things I like about BAC:

1) 5.4% yield
2) Great stock for early retirees. They raise the dividend around 10-15% a year, which more than keeps up with inflation.
3) The P/E ratio is in single digits.
4) Good opportunities are available now to buy out smaller banks and S&L's.
5) Fairly liquid options are available.

BAC 1-yr chart: