Recently, the financial sector in the US has emerged quite strongly with impressive performance indicators and positive growth, both of which reflect promise for investors. In this stock review, the subject of my financial analysis is Bank of America (BAC) - one of the largest banks in America today. Bank of America overshadows many of its competitors with its massive capital. Looking at how well the stock has performed recently, I strongly believe that it is a safe investment option for investors amidst growing market uncertainty.
Bank of America has cleverly reshaped its global strategy with the introduction of new initiatives that have helped it to adapt to changing market trends. The company has achieved this by redirecting its strategic emphasis to core development projects, announcing new acquisitions, making smart investments in profitable ventures, divesting non-core assets, and introducing strategic expansion policies.
Bank of America has recently launched the Edge Select Portfolio's Program under which it will provide customers with greater access to actively managed diversified portfolio's through a lower balance requirement. This move is a step in the right direction as it will attract more investors towards the business helping it to widen its competitive moat.
Another recent innovation by Bank of America was the launch of Trade Pro, an electronic trade and supply chain portal for large corporations and middle-market companies that seek to improve trade and financial supply chain operations. This initiative to establish an online platform for marketing clearly iterates the bank's initiative to aggressively target a greater share of the market. The bank also aims to achieve this through the recently launched range of new online/mobile capabilities for its Merrill Edge customers such as a Merrill Edge mobile application for popular iOS and Android-powered handheld devices. These applications will allow registered Merrill Edge Customers the freedom to invest anywhere on the go.
Moreover, Bank of America's recent initiatives to guarantee solid offerings in worldwide trade and supply chain finance recently earned it an honor by some leading financial trade publications. In addition to this, the Merrill Lynch Fund Survey iterates that the global financial outlook is a positive one and is conducive of higher growth and greater returns for investors along with a sharp rise in Eurozone confidence. This report has greatly affected investor sentiment for businesses in the financial sector as investors are optimistic of corporate profits.
Economics teaches us that one effective way of maximizing revenues and growth is to minimize expenses and cut down on liabilities. In light of this, a series of recent initiatives promise positive signs of growth for the business along with greater cash flows. In a bid to redirect its strategic focus towards core operations, the bank has recently announced to divest all non-US wealth management ventures - a move that will grant the stock a shorter tail and bigger bite. Therefore, I believe that Bank of America has taken a step in the right direction, a move that is expected to help the stock in realizing higher efficiency and greater growth.
Citibank (C), the traditional rival of Bank of America, is the largest and most formidable direct competitor in the industry, employing a staggering market capitalization of nearly $100 billion and trading volume of more than 43 million. The stock is among the most attractive investment options in the industry even as it aims to undergo radical restructuring in order to widen its competitive moat. With an upgrade in the stock's market position by S&P, I believe that Citi is the one competitor that has performed almost as impressively as Bank of America.
U.S. Bancorp (USB) is considered among the smaller players operating in the industry with a market capitalization of $60 billion and trading volume of more than 11 million. The stock offers $0.78 in dividends to investors on earning per share of $2.62 which is impressive when judged by industry standards. All these factors have ensured that the risk of investing in this stock has been relatively low for investors.
JPMorgan Chase (JPM) is another formidable competitor of Bank of America that has a global outreach. Although a popular investment option for many, investor sentiment for the stock has wavered significantly owing to the fact that it faces a series of legal lawsuits such as the Finkelstein & Krinsk LLP Files Class Action Suit. The final outcome of this lawsuit will greatly determine the kind of sentiment that the stock will enjoy from investors. Therefore, I strongly believe that Bank of America is a safer investment option since it promises stability and steady returns on investment.
Wells Fargo (WFC) has posted an impressive performance in recent fiscal quarters. The stock has managed to post a better performance in the current year, surpassing projected financial targets set by speculators. Although Wells Fargo is still working on trying to improve its financial outlook, leading financial highlights in the first fiscal quarter of this financial year indicate strong positive trends that have reaffirmed positive investor sentiment in the business. As a result, I believe that this stock will continue with its positive upward trend.
After reviewing the financial performance of all leading stocks of the industry, I strongly believe that Bank of America is poised for higher growth, especially considering the recent innovations in marketing strategies that it has introduced. Although other banks in the US financial sector have also revised their strategies to increase their competitiveness, their overall progress has been rather sluggish in comparison. Bank of America is currently trading around $7. I expect the stock to climb back up toward the $9 to $10 level by late 2013.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.