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Justin M. Hall
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In transition, I plan to update my Bio in the near future. -- Justin
  • The Big Move: Financials Are Positioned for Significant Advance 3 comments
    Jan 9, 2012 12:19 AM | about stocks: BAC, ETFC, IBN, IYF, XLF, SPPI, BRK.B, WFC, KBWB, IYG, RKH, BSCG, KBE, BSCF, UYG, FTCS, JKD, IXG, IWX, MGV, SPYV, IVE, RALS, CVY, SPHB, VTV, PRF, NY, IWD, IUSV, OEF, XLG, CSM, RYJ, IWL, MGC, DGT, PMA, SPY, VOO, IVV, UVG, ONEK, EUSA, VV, PBP, IWB, THRK, VTI, ITOT, IYY, RSU, IWV, FAS, RPV, DIA, NYC, SSO, EPS, TOK, E
    1/9/12


    A Bold Bet on Bank of America (NYSE:BAC)
    Over the past three months or so, I’ve been building upon a longer-term position in BAC – allegedly the most hated bank in America. 

    For US banks, expectations are low and shares remain dirt cheap compared to many of their foreign peers. The big Canadian banks, for example are trading at/near 3 X their book value.  Of the US lot, BAC has taken the worst beating, but I don't need to tell you that.  Right now, BAC is trading at/near 0.28 X its book and 0.77 cash values.
     
    A Shift in Sentiment?
    On Friday, 1/6/12, BAC appears to have formed a bullish pennant pattern. I expect that we will get confirmation sometime this week, 1/9/12 to 1/13/12.


    RECOMMENDATIONS
    I recommend that investors buy either (1) shares of BAC common stock at/near $6 OR (2) near-the-money January 2013 calls.  Whether investors elect to play shares or calls, use $15 as an exit target.

    PRICE TARGET RANGE
    My 1/18/13 price target range for BAC is set at $15–$20.
     
    CATALYST
    Going forward, I believe BAC is potentially setting up for a big move in the coming days and weeks. 

    On Friday, 1/13/12, JP Morgan (NYSE:JPM) will lead off the big banks Q4 2011 results. I believe the JPM report might have an impact on BAC shares.   Given that BAC is already setting up very nicely (reference the chart above), the JPM results are likely to have a positive impact on BAC as well as some of the other big banks.  Let's see how it plays out.

    On Thursday, 1/19/12, BAC is scheduled to report Q4 2011 results before the open.  Between now and then, I think shares are likely to advance higher. IF the company provides some sort of positive guidance - sufficient enough to just exceed the already very low expectations, then look out - we might just see that big move, supra.

    Note:  Based on my current projections, I anticipate that shares could potentially trade at/near the $12 mark by May 2012.

    Do I recommend that investors run out and buy up a bunch of near-term BAC calls? No! 

    You’ve gotta be patient and play it smart.  If BAC gets a near-term boost, great.  If, however, there's an underwhelming response to next Thursday's report, the longer-term positions recommended, supra, will give investors ample time for things to improve over the course of the year.  And I firmly believe that the circumstances surrounding BAC will significantly improve in 2012.

    CONCLUSION
    Between now and 1/18/13, I am confident BAC will prove to be a solid investment.  And that, you may hang your hat.

    70 ETFs HOLDING BAC

    OTHER PREFERRED FINANCIAL PLAYS
     

    E*Trade (NASDAQ:ETFC)

    Broker
    I prefer ETFC’s January 2013 $10 calls.   My 1/18/13 target for ETFC is set at $15.

    ICICI Bank (NYSE:IBN)
    Emerging Markets
    Like BAC and ETFC, I prefer the January 2013 $30 calls. My 1/18/13 target for IBN is $40+.

    iShares Dow Jones US Financial Sector (NYSEARCA:IYF)
    Diversified ETF
    Avoid the IYF options and stick to the shares / units.

    Financial Select Sector SPDR (NYSEARCA:XLF)
    Diversified ETF
    Again, I would avoid the XLF options and just play the shares / units.

    SEE ALSO
     
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Comments (3)
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  • Moon Kil Woong
    , contributor
    Comments (11058) | Send Message
     
    Everytime BAC jumps on general market moves people keep coming out with the buy garbage because it smells less bad than what people expect it. BAC remains very risky and very poor in management , execution, profitability, risk mitigation, and asset profile. There is little to be exited about save that the government may help them if things get dire for them. Stay away. There are a boatload of better, less risky, more rewarding buys out there if the market turns up.
    9 Jan 2012, 03:12 AM Reply Like
  • Justin M. Hall
    , contributor
    Comments (753) | Send Message
     
    Author’s reply » C'mon MKW - cut me a little slack, my friend. :-)

     

    Admittedly, I didn't time my BAC entry perfectly. Who is perfect at the game anyway? Not anyone I know.

     

    It should be evident that I am betting against conventional wisdom, which you have clearly articulated in your comment. I will say that I do not agree with your take on BAC's management. In time, I believe their efforts will pay off. But let's set that aside. With shares trading at/near 0.3 X book and 0.75 X cash values, BAC, in my view is a great contrarian, value play. No one likes it. And precisely for that reason, inter alia, I think BAC is worth giving some serious consideration.

     

    + To be fair, I do think it's worth mentioning that I have established a pretty impressive track record with investors here at SA and on my site. And as you know, I don't just post things willy-nilly. There's a method to the madness; and I elected to post my take on the financials and specifically BAC now because I'm confident that the call will prove right in time. If I weren't, I would have never wasted the time.

     

    Remember the rule: [t]rade what you see and not what you think? I believe this rule is applicable to BAC and the other financials right here and now.

     

    I believe the negatives, which you highlighted above, are well documented, known by all, and already priced in.

     

    And at some point, the tide turns and the doom and gloom fades. And I believe we're near or at that juncture.

     

    As you know, I do value your opinion, but we must agree to disagree on this one.

     

    Let's give it time and see how it plays out. I think you will be quite surprised.

     

    Justin
    9 Jan 2012, 04:41 AM Reply Like
  • Regarded Solutions
    , contributor
    Comments (15770) | Send Message
     
    great indepth look Justin!.......great dovetail with my outlook.

     

    RS
    9 Jan 2012, 08:13 AM Reply Like
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