This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bank of America - A Play for the Recovery

NEW YORK ( TheStreet) - Among TheStreet's 10 Cheapest Bank Stocks for 2011 , Bank of America (BAC - Get Report) stands out as a low-risk play among actively-traded bank stocks.

While all four of the nation's largest holding companies -- which also include JPMorgan Chase (JPM - Get Report), Citigroup (C - Get Report) and Wells Fargo (WFC - Get Report) -- are trading at historically low levels when looking at forward price-to-earnings ratios, Bank of America stands out because it trades at just 1.1 times tangible book value, and while Citigroup is cheaper at 0.9 times book, its shares are facing the overhang of the industry bailout, as the U.S. Treasury continues selling its stake in the company left over from the Troubled Assets Relief Program, or TARP.

All of the "big four" should continue to enjoy a boost of earnings over the next several quarters, since all got themselves into an over-reserved position, which was the only logical way to go in the midst of the credit meltdown. The release of loan loss reserves was the major theme for second-quarter earnings.

Bank of America's forward price-to-earnings ratio of 8.6, based on the consensus earnings projection of $1.54 a share for 2011 among analysts polled by Thomson Reuters, looks very low ion an industry where healthy names typically trade for 12 times earnings. And the consensus estimate for 2012 is much higher, at $2.27 a share, showing quite a bit of potential for new investors.

Guggenheim Securities analyst Marty Mosby calls Bank of America a "value play," and upgraded the shares to a buy rating on August 13, with a 12-month target of $16.50. When Mosby's report was published, shares closed at $13.06, which the analyst said was "a good entry point." Based on Friday's closing price of $13.28, Mosby's target would be a 24% return.

Not bad, but investors might want to look beyond the typical 12-month horizon for analysts making investment recommendations. Eventually Bank of America will begin returning capital to investors, though buy backs, or better, through meaningful dividends, which will build additional support into the shares.

A play on Bank of America is a play on the nation's economic expansion. The company stands to benefit from the coming wave of industry merger activity, along with the eventual recovery in the market for initial public offerings and other investment banking activities. When loan demand eventually picks up, Bank of America will also be in the thick of things, especially as a major player in the residential mortgage market.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $17.48 0.00%
C $54.21 0.00%
JPM $67.17 0.00%
WFC $55.39 0.00%
AAPL $117.81 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs