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.
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.
BAC also owns a large share of SAMBA (Saudi American Bank of America) which operates int the Middle East with HQ in Riyadh.
BAC also has its large operations in Hong Kong, Singapore and Makati in the Philippines, and other operations spread throughout the fastest growth countries of Asia and Latin America.
In fact, BAC has had an Asian hub operations center in Makati, Philippines for about 30 years. From that point BAC fanned out throughout Asia during the growth of the "Asian Tigers" and naturally right into the China "rocket".
No other major company has more experience in Asia than this one. None.
i agree i just wish I had more money to buy at these levels
I plan on buyin with my tax refund but with my luck by the time I get that money BAC will be like $8-9 so mad i wanted to pile up on GE and BAC on monday
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.
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?
Just one minor disagreement with point #7 - New loans can still be had with as little as 3% down for conventional financing with 700 FICO scores, 5% down with 620 FICO scores. Both of these scenarios require PMI which does mitigate the banks exposure - there also is FHA financing with 3.5% down with 620 FICO's. Bank of America does all these types of loans.
This stock has huge potential
Outstanding...exactly my sentiment. stay long dont panic and enjoy what will be in the next few years pretty much the only game in town 6-10 large super banks serving the same ole same ole...you wont be able to tell the difference except by the color of the shirts or the teller with the biggest tits. fundamentally a cash machine.
Well thought out but I disagree on your points #1 and #8. Regarding point #1, in 3 years BAC should have repaid TARP according to Lewis. If that is the case the multiple should be between 10 and 11 times earnings. A couple of analysts have said they think BAC can earn at least $4 a share on a more normalized basis. Even at the 10 times earnings on the low end that would put it at $40 minimum. (10 x $4 = $40)
Your point #8 about BAC having to keep deposits down under 10% is not correct. The 10% limitation only applied when a organization wants to buy or merge. BAC, and any other bank, has been able to grow internally to over 10% for many years. However, if bank "A" was 9% and bank "B" was 2%, they would not have received approval to merge without divesting enough to get back to the 10%. With the current crisis that limitation has pretty much been thrown out the window.