Bank of America Corporation Corp. (BAC) is an American multinational bank and financial holding company. Its Global Wealth and Investment Management division is one of the top ten largest U.S. wealth managers, with over $500 billion in assets. In this article, I will be discussing some of the top sells of Bank of America from the last quarter (Source: 13F filing).
AT&T Inc. (T): My Take - Sell
Bank of America sold 10,438,466 shares of AT&T last quarter. AT&T is the largest telecommunications company in the U.S. The company provides local and long-distance calling over its wired and nationwide wireless networks; video under AT&T's U-verse brand to a portion of its U.S. wireline footprint; and voice and data services to businesses worldwide.
AT&T reported disappointing Q4 F2011 results with a 25% year-year decline in EPS. This decline was on the back of weakened margins from both wireless and wireline businesses. Wireless margins sequentially decreased by 1500 bps due to smartphone subsidies, especially with higher iPhone 4S sales.
The company's management guided for a margin expansion in 2012 with flat smartphone sales. However, it seems highly unlikely with the expected launch of iPhone 5 in July. Further, headwinds in the form of continued residential line and broadband subscriber losses, and slowing U-verse adds are expected to continue. Although the company's management has indicated restructuring (sale or potential spin-off) of its legacy wireline business, I don't see many strategic options for AT&T. CenturyLink (CTL) has categorically denied any interest in additional access lines and a spin-off to AT&T's own shareholders is also unlikely. With operational challenges in wireless and limited options with its wireline business there are no positive catalysts for near-term price appreciation. On the other hand, downward revision of guidance is likely, which may act as a negative catalyst.
Boston Scientific Corporation (BSX): My Take - Sell
Bank of America sold 2,314,238 shares of Boston Scientific Corporation last quarter. Boston Scientific develops, manufactures and markets medical appliances and equipment that is used in interventional cardiology, peripheral interventions, vascular surgery, electrophysiology, neurovascular intervention, oncology, endoscopy, urology, gynecology and neuromodulation. It generates almost 50% of revenue from Cardiac Rhythm Management devices and Drug-Eluting Stents.
Last month, Boston Scientific reported weak 4Q 2011 results with sales significantly below consensus estimates and management's guidance. This sales performance is attributed to disappointing CRM and DES sales shortfalls in all regions due to market slowdown and pricing pressures. Further, Boston Scientific lost market share in the ICD (Implantable Cardioverter-Defribillators) market in the U.S.
Boston Scientific revenue guidance for 1Q 2012 was also weak. Sales growth range is expected to be -4% to 1%, indicating further CRM market contraction and pricing headwinds. Though pricing trends are improving across a few segments, ICD and DES pricing is expected to be a negative for Boston Scientific in the near term. While management's initiative for improving the cost structure in 2012 is positive, I believe the company has to show an improved top line in order to reignite investor interest in the company. Until then, I would recommend avoiding the stock.
Apollo Group Inc. (APOL): My Take - Hold
Bank of America sold 811,686 shares of Apollo Group last quarter. Apollo Group, Inc. (Apollo Group) is a private education provider. The Company offers educational programs and services both online and on-campus at the undergraduate, master's and doctoral levels through its wholly owned subsidiaries, The University of Phoenix, Inc.; Institute for Professional Development; The College for Financial Planning Institutes Corporation, and Meritus University, Inc. I would keep a close watch on Apollo Group. It appears that FY12 will likely be a trough year for the Apollo Group and it will resume growth going forward. However, I would wait for next couple of quarters to see the company's actual performance before recommending a buy on it.
Comcast Corporation (CMCSA): My Take - Buy
Bank of America sold 2,966,932 shares of Comcast last quarter. Comcast Corporation is the largest U.S. provider of cable services, with over 22 million basic subscribers. Comcast is also a majority owner of NBCU, which includes the NBC TV Network, MSNBC, USA, Sci Fi, Bravo, E!, CNBC, and several other cable networks, Universal Films and Universal Theme Parks.
Comcast recently reported better-than-expected Q4 2011 earnings and beat street consensus on all operating metrics. The strong earnings were primarily driven by modest video subscriber losses and higher High Speed Data net adds from product bundling. Comcast has also raised its dividend, with the yield now at a respectable 2.3%. Further, the management is keen to return cash to shareholders, with a $6.5 billion buyback authorization in 2012.
Going forward, the operating momentum seems sustainable, with improved video subscriber trends and solid growth potential in the high-margins HSD market. Management is expecting video subscriber growth for the first time in five years, which is a big positive. Also, smart initiatives by management in advertising and SME offer further growth potential. I believe Comcast is a good buy with increasing shareholder returns, continued evidence of superior execution, and attractive valuation.
Apple Inc. (AAPL): My Take - Buy
Bank of America sold 2,163,139 shares of Apple last quarter. Apple reported excellent earnings numbers for the last quarter, beating even the most optimistic estimates. Its guidance was also better than expected, with strong momentum in iPhone and iPad sales.
Going Forward, Apple has two good catalysts in 2012 in the form of iPad3 sales and iPhone5 launch. From a medium to long-term perspective, Apple's secular growth and market share gains in the smartphone and tablet space are likely to continue for the next several years. Apple's strategy of customer-centric innovation and launching products with potential to create whole new markets is still intact. If one goes by Steve Jobs' biography, Apple TV is likely the next such product in the line.
At a valuation of just 10x forward earnings (adjusted for cash), Apple is trading at very attractive levels. If we look at Apple's brand awareness and customer loyalty, it actually deserves a mid teen multiple--inline with some of the reputed large/mega cap consumer companies with strong brand names. I see further chances of Apple's multiple appreciation and recent announced dividends and shares buy backs should provide a good support on the downside.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.