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Bank of America Corporation Message Board

  • researchmadatory researchmadatory Mar 12, 2009 9:51 PM Flag

    One reason I bought BAC

    1. BAC will be $35 within five years. That is about 100% per year but we do not know when the major rise will start. Not a bad return for the patient.

    2. BAC has about $18 to $20 billion China investments. Over time these investments will likely outperform virtually all other country stocks.

    3. During this economic slowdown, Americans are, for the first time in decades saving more. Due to fear of the stock market, most of this savings is going into checking and savings accounts. Since BAC has accounts of one form or another with over 50 percent of Americans, the odds favor BAC deposits rising. This is good. The input feed that drives banks is deposits = money.

    4. Deposits are reaping about 1 to 2 percent in most accounts.

    5. Banks can borrow at just over 1 percent.

    6. Banks products are those that make about 400 percent profit (including all costs) on that 1 percent money by lending it out at 5 percent or better.

    7. New loans require 20 percent or more down payment on mortgates. This means that, combined with making about 400% profit on these new mortgages, BAC has a large cushion. Additionally, due to the demand for credit VS supply, BAC is lending to the "cream of the crop" = least risk borrowers. This applies to both business and consumers.

    8. BAC, previously a very conservative, low risk lender with focus on deposit money as source of funds has now moved more heavily into mortgages via CFC and investment banking via MER. BAC is implementing the same BAC conservative policies and procedures on these business units = higher margins, lower risk, huge potential as we move out of this recession. BAC could very well emerge as the most important financial institution in USA. One thing about BAC that GS does not have is its huge deposits business. In fact, it is so large, until last year, BAC had to limit its growth in deposits to adhere to the 10 percent rule.

    9. With 50 percent of Americans having an account with BAC it is highly unlikely politicians are going to come even close to nationalizing this bank. In fact, the politicians who want to be re-elected will do whatever it takes to support this company for this reason alone. 535 Senators and Congresspersons are the same.
    No chance BAC will be nationalized when over 50 percent of American voters have accounts with this company.

    Actually, Lehman Brothers, Bear Stearns and Washington Mutual were virtual unknowns to most Americans.

    Unlike those, BAC has a "presence" in in virtually every locality in USA and... "all politics is local".

    10. IMHO being a wise investor, it might be worthy of consideration to buy and hold this stock for the next five to ten years to see this emerge. One must consider all factors and I think the factor most important is survival. BAC is a survivor.

    There is one more little thing called mathematics.

    As time moves forward, the percentage of prime loans as a total of BAC /CFC loans rises at an exponential rate. The longer BAC makes a profit and the more loans it delivers with new, low cost, money, the greater the operating margins and... then... profit margins. This is good.

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    • Just a few little caveats...we're now dealing with a Socialist (borderline Communist) administration and Congress. The massive debt overhang is a HUGE burden on the overall economy, dollar, and future economic strength of the country.

      If things like the Messiah's global warming agenda, massive tax increases, corporate harrassment, etc, continue and are fully implemented, it will drive even more companies overseas further hurting the job market.

      HUGE tax increases and local, state, and federal DEBT are giant obstacles to any sort of sustained economic growth.

    • BAC was $35 five months ago...will it take 5 years to get back what it took five months to lose?

    • Thank you. I like your analysis but I strongly believe BAC will be $35 before year-end. C is also a good BUY as well?

      • 2 Replies to jackpham99
      • Comments on original post.

        mosio1955: New loans can still be had with as little as 3% down for conventional financing with 700 FICO scores

        floridacrac: **#1 and #8. Regarding point #1, in 3 years BAC should have repaid TARP according to Lewis

        floridacrac: analysts have said they think BAC can earn at least $4 a share on a more normalized basis

        floridacrac: The 10% limitation only applied when a organization wants to buy or merge

        addicted_to: One REIT(acquired with MER) was acquired for pennies on the dollar; actually far below what would be considered fire-sale pricing.

        Many posters indicate the $35 within five years is conservative.... some indicate 3 digit stock price. Could be 3 digits but need to see how BAC CFC MER work together.

        Another addition to list is the fact that BAC stock is smashed due to fear and extreme pressure placed on it b irrational pessimistic pundits and analysts.

        Interestingly the Roubini or whatever his name is is from Turkey, a country that had a severe banking crisis in around 2001 and, in that case, nationalization was also not chosen as an option. So Roubini needs to look in the mirror.

      • I agree BAC will be over $20 by year end... $35 sounds high

    • If everything about BAC looks so perfect, then why its price has recently touched the $2.xx range?

      Maybe it is the Bug Bunny's philosophy: So long you don't look down, you can sky-walk off the cliff.

      • 2 Replies to heintz45
      • because people acted AS IF it was gonna go BK/nationalized/dilute...........on top of them losing money

        wake up: that was ALL a LIE..............do not doubt the move its for real

        if decoupling the index from the banks portfolios for a while allows some recovery in the banks and stabilizes the market as a whole - a bottom could be put in and turn the fortunes of this entire market around. Think about it - if the index rises the next time the banks report earnings they would be taking MARK-UPS on these bonds as they have not sold them. That multi-billion loss might turn into a multi-billion gain and who is going to stay short a bank stock knowing that is coming?

      • pure psychology... not fundamentals.

    • Good post but the stock price will be $35 by the end of this year and triple figures in 5 years. They will have a very good P/E ratio...especially when all of the fruits of Country Wide and Merrill kick in.

    • Bump Bump

      • 1 Reply to andrew2003ji
      • The main reason to buy BAC is that on its own, BAC enterprise is worth $35 on recovery.

        But, you can add $35 to that for MER when that business unit recovers and yet another $35 for CFC mortgage business.

        BAC is the *-*only*-* financial institution in this United States of America with over 50 percent of Americans holding an account with it.
        No other company in USA has the massive *-*deposits*-* as does BAC. Deposits is money. GS, JPM, C and the rest are jealous of this fact.

        Money is the fuel that makes money for a finanicial institution. Right now the cost of money to BAC is 1.44 percent. Right now that same money can be loaned out via mortgages, small business loans, credit cards at between 5 percent and 20 percent.

        Translated: Over 500 percent average profit margin on BAC main product:money.

    • Well thought out and thank you.

      As with most financials though, I'm concerned about the Credit Default Swaps that may hemorrhage the financial world soon.

      Any thoughts on that?

      • 1 Reply to yoper7
      • 1. BAC will be $35 within five years. That is about 100% per year but we do not know when the major rise will start. Not a bad return for the patient.

        2. BAC has about $18 to $20 billion China investments. Over time these investments will likely outperform virtually all other country stocks.

        3. During this economic slowdown, Americans are, for the first time in decades saving more. Due to fear of the stock market, most of this savings is going into checking and savings accounts. Since BAC has accounts of one form or another with over 50 percent of Americans, the odds favor BAC deposits rising. This is good. The input feed that drives banks is deposits = money.

        4. Deposits are reaping about 1 to 2 percent in most accounts.

        5. Banks can borrow at just over 1 percent.

        6. Banks products are those that make about 400 percent profit (including all costs) on that 1 percent money by lending it out at 5 percent or better.

        7. New loans require 20 percent or more down payment on mortgates. This means that, combined with making about 400% profit on these new mortgages, BAC has a large cushion. Additionally, due to the demand for credit VS supply, BAC is lending to the "cream of the crop" = least risk borrowers. This applies to both business and consumers.

        8. BAC, previously a very conservative, low risk lender with focus on deposit money as source of funds has now moved more heavily into mortgages via CFC and investment banking via MER. BAC is implementing the same BAC conservative policies and procedures on these business units = higher margins, lower risk, huge potential as we move out of this recession. BAC could very well emerge as the most important financial institution in USA. One thing about BAC that GS does not have is its huge deposits business. In fact, it is so large, until last year, BAC had to limit its growth in deposits to adhere to the 10 percent rule.

        9. With 50 percent of Americans having an account with BAC it is highly unlikely politicians are going to come even close to nationalizing this bank. In fact, the politicians who want to be re-elected will do whatever it takes to support this company for this reason alone. 535 Senators and Congresspersons are the same.
        No chance BAC will be nationalized when over 50 percent of American voters have accounts with this company.
        Actually, Lehman Brothers, Bear Stearns and Washington Mutual were virtual unknowns to most Americans.
        Unlike those, BAC has a "presence" in in virtually every locality in USA and... "all politics is local".


        10. IMHO being a wise investor, it might be worthy of consideration to buy and hold this stock for the next five to ten years to see this emerge. One must consider all factors and I think the factor most important is survival. BAC is a survivor.

        11. BAC operations center in Makati in the Philippines has been its hub in fast growth Asia for about 30 years. BAC has more experience in Asia than virtually any other USA business entity. Its diverse business transactions and holdings in Asia and Latin America are sufficiently pristine that others can only hope to emulate that presence.

        12. Bank of America Corp. now ranks as the largest U.S. bank ranked by assets, according to a study by SNL Financial.
        "Charlotte, N.C.-based BofA had total assets of almost $2.5 trillion as of Dec. 31."

        As to credit default swaps and their impact on banks, that is one thing good about BAC as I understand it. Prior to this debacle and the feds convincing BAC to take over CFC and MER, Bank of America was very risk adverse and conservative in its dealings with these derivatives. As to how it will handle MER investments, IMHO BAC is unwinding the highly leaveraged, already written down much of it and, is decreasing risk by application of its own risk adverse policies and procedures overlaying CFC and MER old & policies.

    • you are about to get your 15th 5 star rating. point 1, most may not believe what you've said there but it's likely true. My ID addicted_to_dd, to avoid any implication to drug addiction, DD stands for due diligence.

      It is a pleasure finding someone who spends the time to express why an investment perspective is worthwhile. Well written and also rare to find on Yahoo's stock message boards.

      I found out something very interesting today. It was sparked by conversing to a couple people, one a recent bank stock buyer, the other a top performer in real estate. What most do not know is the value of so-called toxic assets. Yet those assets, let's say those acquired by way of Merrill Lynch and ML's underwriting real estate loans, those assets were bundled, both toxic and most importantly non-toxic assets and are now BAC assets. That bundle represents what could be called a REIT. Said REIT was acquired for pennies on the dollar; actually far below what would be considered fire-sale pricing.

      Panic can be pervasive, wildly irrational and result in an extremely low valuation to share pricing. Believe it or not, based on what I've learned BAC is, even now, deeply undervalued. You are right, however. It is going to take time to get to fair valuation.

      Thanks for a very informed perspective.

      • 1 Reply to addicted_to_dd
      • repost of addicted_to_dd

        good info, imvho.
        you are about to get your 15th 5 star rating. point 1, most may not believe what you've said there but it's likely true. My ID addicted_to_dd, to avoid any implication to drug addiction, DD stands for due diligence.

        It is a pleasure finding someone who spends the time to express why an investment perspective is worthwhile. Well written and also rare to find on Yahoo's stock message boards.

        I found out something very interesting today. It was sparked by conversing to a couple people, one a recent bank stock buyer, the other a top performer in real estate. What most do not know is the value of so-called toxic assets. Yet those assets, let's say those acquired by way of Merrill Lynch and ML's underwriting real estate loans, those assets were bundled, both toxic and most importantly non-toxic assets and are now BAC assets. That bundle represents what could be called a REIT. Said REIT was acquired for pennies on the dollar; actually far below what would be considered fire-sale pricing.

        Panic can be pervasive, wildly irrational and result in an extremely low valuation to share pricing. Believe it or not, based on what I've learned BAC is, even now, deeply undervalued. You are right, however. It is going to take time to get to fair valuation.

        Thanks for a very informed perspective.

    • Great Post!!

    • -bump-

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15.31-0.11(-0.71%)Mar 27 4:06 PMEDT