Investors Should Just Keep Banking On Bank Of America

Jul. 22, 2019 9:02 AM ETBank of America Corporation (BAC)18 Comments
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WG Investment Research


  • Bank of America reported Q2 2019 results that beat the consensus bottom-line estimate. Additionally, the bank's operating results were impressive almost across the board.
  • The interest rate environment is (and has been) a headwind, but I believe that investors should just keep banking on Bank of America as a long-term investment.
  • Bank of America is my largest position, 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's (NYSE:BAC) stock has performed well so far in 2019, as BAC shares are higher by approximately 19% over the last seven-plus months. However, the stock has still underperformed the broader market by a wide margin over the last 52 weeks.

ChartData by YCharts

Financials have been in the crosshairs for a while now as many pundits have questioned their near-term business prospects due to concerns in the economy and the weakening interest rate environment. These concerns have outweighed the sector's strong operating results, but I believe that risks have been overblown and that many of the financials, including BofA, are long-term buys in today's environment. Example A - BofA after its impressive Q2 2019 results.

Just Keep Banking on BAC, Strong Results Even In A Tough Environment

On July 17, 2019, BofA reported Q2 2019 results that beat the consensus bottom-line estimate by $0.03 but that fell a little short of the top-line estimate (missed by $30M). The bank reported adjusted EPS of $0.74 on revenue of $23.1B, which also compares favorably to the year-ago quarter.

Source: Q2 2019 Earnings Presentation

Highlights for the quarter:

Source: Q2 2019 Earnings Presentation

The most notable highlight, in my opinion, is the 200bps operating leverage increase on the [strongish] 2% YoY revenue growth. BofA has been on a mission for years to reduce operating expenses (remember, New BAC?), and the bank is now reaping the benefits from those efforts.

Source: Q2 2019 Earnings Presentation

Moreover, as a direct result, the bank's return and efficiency ratios have continued to improve quarter after quarter. For example, the bank's return on assets ratio has been on a steady upward climb since fiscal 2011.

ChartData by YCharts

At the end of the day, BofA's results for Q2 2019 (and actually for the last four quarters) show that

ChartData by YCharts

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This article was written by

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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. 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.

Additional disclosure: This article is not a recommendation to buy or sell any stock mentioned. These are only my personal opinions. Every investor must do his/her own due diligence before making any investment decision.

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