orestruss'  Instablog

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  • My calculation of the worst case scenario for BAC 3 comments
    Aug 8, 2011 6:46 PM | about stocks: BAC
    Here is the worst possible scenario for Bank of America as I see it. BAC may be forced to raise another 20 billion to deal with ongoing claims. Say they issue 4 billion new shares at $5 each. The brings the total count to 14.3 billion outstanding shares. Present TBV of each share is $13, after the capital raise (131.69+ 20)/ 14.3 = $10.62. 
    I am generous now, and assume another 20 billion in mortgage losses..TBV in that horrific nightmare scenario will drop to appr $9 TBV per share. Remember, most bank trade at 1.6-1.9 times per TBV, and here we get upper teens. Also note, that in that "worst" case scenario, BAC will become clean bank with earnings power of $1.4-1.6 ps. Anyway you slice it, BAC is worth at least $ 15-17 per share! I am buying more! We need CEO to step out and provide some guidence before BAC crashes to $3-4 mark and capital raise may become extremely painful to shareholders! 

    Disclosure: I am long BAC.
    Stocks: BAC
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Comments (3)
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  • 1980XLS
    , contributor
    Comments (3360) | Send Message
    You seem to be a bit inaccurate in your BAC share price estimate, LOL
    26 Nov 2011, 05:31 PM Reply Like
  • Min Ren
    , contributor
    Comments (34) | Send Message
    Haha orestruss!!! How's your investment in BAC going?
    3 Jan 2012, 06:14 AM Reply Like
  • 1980XLS
    , contributor
    Comments (3360) | Send Message
    Orestruss seems to be a bit off in his valuation assuptions in BAC.
    4 Jan 2012, 09:03 PM Reply Like
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