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Anthony DiBenedetto
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My name is Anthony DiBenedetto and I am a resident of Louisiana. I am currently a Junior working on my Finance degree. I am an avid dividend investor that looks for growth over the long-term. I not biased to a particular sector as I share an affinity for all stocks. I will continue to write... More
  • Is Bank Of America The Real Deal? 0 comments
    Jan 8, 2013 6:40 PM | about stocks: BAC

    In the words of the renowned Jim Cramer "BUY BUY BUY!" Bank of America's (NYSE:BAC) stock is up almost 100% YTD and we have conviction enough to believe that this is only the beginning. With the stock depreciating -0.11 (0.91%) today, I believe that this stock is an immediate buy. I think we were all pleasantly surprised whenever we witness the stock approaching the $12.00 price range, and now that it has subsided slightly I think that this can be one of two things: A buy and hold or an easy trade. No shorting opportunities for BAC. A few months ago, the stock was trading around the $8-9 region and thanks to business-related persistence, the stock has found new life.

    Why Bank of America now?

    I do not have conviction in too many stocks, but this one has given me that pleasure. Currently, the stock is trading around 30% to its tangible book value, which basically means that it's relatively cheap in comparison to the amount of liquid cash it has in the books. Under "Project New BAC," the company plans on eliminating over $5 billion (basically by cutting jobs) by the fiscal year of 2013. Also, the company's VaR (Value at Risk) is down 12% from the previous quarter to $55 million. Sounds good right? Great. So we all know how terrible the housing market has been doing since the crash in 2008 and we also know that BAC was a big holder of the mortgages that defaulted. Not to worry though, BAC and the famous Fannie Mae agreed on a mortgage settlement of $11.6 billion to settle claims that resulted from mortgage-backed investments (NYSE:EW) that blew up during the crash. If you've read "The Big Short," by Michael Lewis, you know all about these ABSs, CDOs, MBIs, etc. Ultimately, the bank knew that it messed up; it made an egregious mistake. Now, they're fixing that mistake and moving forward. The deal was announced Monday and explains that BAC will pay $3.6 billion to Fannie Mae and $6.75 billion towards its 30,000 loans that the unit sold to the agency. The final $1.3 billion is payment to the agency for not dealing with the foreclosures fast enough. This bank is ready to make this situation a thing of the past and move on back into prosperity.

    What do the analyst think about this stock?

    This chart is compliment of the Nasdaq Corporation Analyst Ratings. 25 companies' analyst have apparently come under the light together and realized that the stock is in a good position and has upside potential. Not to give too much credibility to these ratings, but I don't have a huge amount of anecdotal experience in quantitatively analyzing companies, so I'll concur with these individuals that are much, much smarter than me. With a 12-month price target range projected towards $14.00 a share, the analyst are quite optimistic on the appreciation of BAC.

    This chart is forecasting the earnings growth of BAC. Based on the assumptions of the analyst covering this company, over the next five years they are expecting the average return on earnings to be 7.63%. For the current year, the earnings forecast is 244.17% over last years. And then finally, next year, the analyst are expecting an increased growth of 135.08% over this years.

    One reliable statistic used to identify stocks at a good value and that possesses prospectively good growth is the PEG ratio. The PEG ratio is basically the Price Earnings ratio divided by the growth rate. Typically, the lower the PEG, the better the stock.

    Final Conclusions

    I am particularly happy with the growth prospects of this company. I think BAC is making the right moves to alleviate themselves indefinitely from the housing bubble, admit that they made a mistake, and move forward from it. Pushing volumes upwards of over 173 million, I think that a lot of people have a lot of different ideas about this stock. I think, in principal, only one thing should matter: the fundamentals. I am a value investor. If I can't see a company making an actual difference in a competitive and innovative way in the future, then I've no interest in it. This company has terrific management and a promising year ahead of them. BAC management is making all the right moves to rid themselves of the old times and renovate the company with quality service and a better plan. My advice is to buy the stock while it is still low. Speculation could bring this stock to around $11.50, but the fundamentals of the company won't change, nor will the statistics. 30% discount to the books. Keep an eye on BAC because based on my opinion Bank of America is The Real Deal.

    Disclosure: I am long BAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I have no affiliation with Bank of America. I have written this blog based on personal interest and educational purposes.

    Themes: long-ideas Stocks: BAC
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