Bank of America Corp.
“I have a deep distrust for all financial stocks.”
I’m an ex-banking analyst, and I know too much about how these institutions are run to touch them with a 10-foot pole — and I wouldn’t touch Bank of America Corp. (NYSE:BAC) with a 20-foot pole.
There is no sales growth, no operating margin growth and no earnings growth — strike one. There’s poor cash flow and a meager return on equity — strike two. And finally, there is not nearly enough buying pressure to lift the stock even if all the fundamentals were in place — strike three.
With BAC, you’re going to see the stock rise and fall on good and bad news in the banking industry, but you’re not going to get the wealth-building power you undoubtedly need in this market. My advice is to stay far away from BAC for the foreseeable future.
“BAC is what I call in a fallen angel.”
BAC once was considered widely owned and admired, and it has fallen monstrously out of favor with Wall Street and investors.
So what went wrong with BAC? Bad mortgages, bad acquisitions (specifically Countrywide and Merrill Lynch) and bad balance sheet management.
Now, can BAC be fixed? Yes, and despite the recent PR debacle over debit-card fees, BAC already is making progress. It is streamlining costs, boosting capital on its balance sheet and rebuilding trust with consumers and investors.
I believe Bank of America is heading in the right direction. The stock has been extremely volatile because of both the company’s own situation as well as the debt crisis in Europe, but I see big upside potential in BAC stock.