First, let me say that I am in the camp that clearly believes (actually, knows) that BAC will not be nationalized in the near future. The powers that be have made that VERY, VERY clear. Could BAC be nationalized at some point? Yes, but it would require the US economy to slide much further into a depression with real estate prices dropping another 20%.
All of that may very well happen, but the reality is near term, when people figure out nationalization isn't imminent, BAC is going to pop, and pop hard. Pursuant to that, i've take a large long call position to capitalize.
What I am interested in from people is a near-term price projection for BAC -- particularly from those in the bullish camp. What do those of you who share my view believe BAC will achieve on a PPS basis in the next 60 days or so.
I am hesitant to guess but I am thinking likely in the $12-$15 range.
A week ago, we were in full fledged panic mode with people fearing an outright takeover by the government and a total loss for common/pfd holders.
This week we learned how the stress test will work:
"Bernanke said banks will first have the opportunity to try to raise capital in the private market, but if they cannot do so, the Treasury will offer to buy convertible preferred shares in the bank.
If losses grow, this can be converted to common equity, giving the government a direct ownership stake and enhancing the bank's ability to absorb write-downs."
In after-hours today, we hear that BAC is looking to sell 1st Republic. The proceeds from that sale plus the savings from the divy cut should have BAC sitting on an additional 5-6 billion this year.
Just kind of tossing mental tid-bits here. The stress test won't be done by your 60 days and the Tres. won't be releasing the results of the tests, their leaving that up to the banks to disclose. But I do think people will have a better gauge of what this bank will be worth a year or two from now and decide to start getting in the water early while it's stupid cheap(my opinion).
So, I gauge we're due another point or 2 just for having the fear of outright nationalisation taken off the table. By the end of April, I think $8 to $10 is doable.
Long 2,000 common and 600 BAC-PH
Great analysis and insights -- much appreciate your response. I hadn't really grasped the timeframes around the stress test and associated results. You make some good points and those need to be taken into consideration with regard to holding any position.
I think i will look for an exit price on my current position in the $9-ish range near term. But, I may be interested in converting into a preferred + leaps combo for a longer term play at that point.
What is your view on the longer term result here -- meaning 12-18 months. Where do you see the common price heading over that time frame?
with my many many years of experience i can gurantee that BAC will be trading at about $70/share. this sounds outrageous but i have formulas that some of the largest trading firms have been trying to buy with hundred million dollar amounts of money. but why should i sell them my formulas for $250,000,000 when I can easily make that no time without them.
60 days huh...this means Q1 earnings will have been released.
I think we will have a pleasant upside and am hoping for a breakout between $8 and $10.
My position: sitting on 1000 contracts of Jan '10 calls. (+WBAAQ). Bought in at $1.95 so I am sitting on a big loss at the moment :(
Wrong. Look at the chart - two weeks ago on Feb. 9th we went over $6, people were saying we will hit the moon and this is the eventual breakout. and what happened. history will repeat itself.
for sure 2 U$S
poor people that think they are going to see BAC high again... in companies in problem... shareholders alwalys lose..because is the oportunity for other people that are out.. to get in to make money (negociation)in this case the bernake's friends like onetime was Mr.Paulson
nobody!!!! includes the goverment!!!!!! is going to give you presentes like Santa Obama say that is thinking in people.
Bac for sure is going to continue an other century but this common like C WFC+WB will go to zero
Stop to make accounts using prefered, or convertibles bonds, or loans. This banks continue to lose money because nobody is taking loans and for sure they don't want to contabil... the mountains of papers of debt from people that left to pay..
realy i think BAC is going to have -4 U$S per share in the next two Qs togheter....privite sector is not going to give loans at 2%.....think for this level of leverage in 5% or 6% ....in 2 months BAC is U$S 2 easy..good luck for you longs, and i hope you can sell yours now with all these stupid rumors at 8 or 10 or 12 or 14..
the stock is currently priced as if nationalization is imminent. As soon as BAC gets a clean bill of health from the stress test, the immediate nationalization fears will pass, and the stock will radically appreciate. You can bank on that.
Who knows what happens 9 - 12 months from now, but near term its going up.