Bank of America Turmoil Masks the Positive

NEW YORK ( TheStreet) -- The possibility of a breakup of Bank of America ( BAC) highlights that bad press can lead to a good investment opportunity.

According to a report in The Wall Street Journal today, two external candidates hoping to replace Chief Executive Officer Ken Lewis at the largest U.S. bank told the board of directors that the company "should consider breaking itself up." As a result, Bank of America's stock dipped 1.5% today, bringing a decline to 16% since mid-October. With each spasm sending the stock down, Bank of America becomes a better value, setting up for a surge when the economy starts to sprint and earnings scale previous peaks.

With the board rightly showing reluctance to break up the company at a time when it would get fire-sale prices for prized possessions like Merrill Lynch, Bank of America needs to find a qualified CEO who isn't afraid to manage the huge, diversified holding company -- at least until the economy and asset values find firm footing.

Leaks about Bank of America's executive search simply create better opportunities for investors to load up on the shares for the long term. Whether or not Bank of America breaks up, investors will profit.

The scrutiny of events that led to the company's acquisition of Merrill Lynch will continue, regardless of a spinoff, as members of the Congressional Oversight Committee love the television exposure they get while bashing management during hearings. The criticism of Bank of America is a good thing for investors, who are confident that the largest U.S. banking franchise -- now with a greatly diversified revenue stream from Merrill Lynch -- will ride the wave of economic prosperity over the next few years.

With dominant positions in bank deposits and mortgages, coupled with a powerful investment bank and a wealth-management business, and now Merrill Lynch's indefatigable brokers, Bank of America is the bank stock to own. Of 31 Wall Street analysts who cover Bank of America, only one has a "sell" rating on the stock. Hedge-fund firm Paulson & Co., headed by John Paulson, who personally earned $9 billion in two years, predicts the stock may double within two years. (Check out John Paulson's portfolio.)

Bank of America is a bargain, as discussed in TheStreet.com's profile of the largest U.S. banks. JPMorgan Chase ( JPM) and Wells Fargo ( WFC) also are excellent so-called recovery plays, while Citigroup ( C) is more of a gamble.

Bank of America's shares are selling for only 1.3 times tangible book value, down from 2.8 at the end of 2007 before the credit crisis hit hard, and 3.5 at the end of 2006 and 2005. As the company's shares have lagged behind the industry, now is a fortuitous time to either build a stake in Bank of America or purchase more shares.

Philip W. van Doorn joined TheStreet.com Ratings., Inc., in February 2007. He is the senior analyst responsible for assigning financial strength ratings to banks and savings and loan institutions. He also comments on industry and regulatory trends. Mr. van Doorn has fifteen years experience, having served as a loan operations officer at Riverside National Bank in Fort Pierce, Florida, and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a Bachelor of Science in business administration from Long Island University.

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