Bank Of America: The Thesis Remains Intact

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WG Investment Research


  • Bank Of America reported strong Q4 2018 results that beat top- and bottom-line estimates. Additionally, the bank's results for full-year 2018 were significantly better than for the prior fiscal year.
  • I believe that the investment thesis for Bank Of America is not only still intact, but that it has actually gotten stronger over the last four quarters.
  • Bank Of America is my largest holding and I plan to stay long the stock.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

Bank of America (NYSE:BAC) reported Q4 2018 results that were well-received by the market, as shown by the fact that the stock finished the trading day ~7% higher. BAC shares are now higher by approximately 20% so far in 2019, but the stock is still underperforming the broader market by 2 percentage points over the last year.

ChartBAC data by YCharts

BAC's impressive stock performance over the first few weeks of 2019 has been nice and all, but in my opinion the stock is still a great long-term buy at today's price. Why? It's simple: Bank Of America has a promising long-term story to tell and it helps that this bank's recent results support the investment thesis for this large financial institution.

The Thesis Remains Intact

BAC was consistently viewed as the "problem child" after the Financial Crisis, and rightfully so, as the bank shelled out billions and billions of dollars in legal fines and settlements. To this point, the trending of BAC's net income over the last 15 years says a lot about how impactful the crisis was to this bank (and its shareholders) - notice the rise, the fall, and the rise again.

ChartBAC Net Income (Annual) data by YCharts

Also, notice that BAC's current net income just recently passed pre-crisis levels, which, in my mind, is meaningful. Mr. Brian Moynihan, CEO, and team have finally righted the ship and, in my opinion, BAC is in the greatest position that it has been in the last 2 decades.

The thesis is simple: BAC's stock has been pulled down by broader market concerns but the bank has several key businesses that have great long-term prospects. Moreover, the bank is properly position to benefit from several major trends - i.e., rising rates, growth in digital operations/processes (lower expense base), and an improving regulatory environment (not as encouraging as it was

ChartData by YCharts

This article was written by

WG Investment Research profile picture
Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long BAC, C. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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