The below is an email I sent to the institutional investor that I am currently interning under. It is my thoughts on why Bank of America should increase greatly within the next few months. Value stocks like Bank of America (especially ones that are dead in the water like BAC) normally stay barely under the radar until they breakout big. Activision Blizzard (which I spotted it at $17.44) is an example of a stock that barely grew at all, but when it broke out, it broke out big. Now I’m not promising some sort of gold mine with Bank of America, but the conditions just may be in that ideal place where BAC could go back to a price reminiscent of its $55 a share glory days.
Good Afternoon Mr. X,
I was looking at various stocks that might be a good investment, but this time instead of looking for P/S, or EPS, I looked solely at the Peter Lynch chart before looking further into the company. I was thinking about your investing strategy and how you like to buy stocks at a discount and sell for profit. I believe that Bank of America is a stock that an investor such as yourself would invest in.
Obviously it would have been best to invest in BAC immediately after its incredible fall, but Bank of America is ready for [another] breakout run. The Peter Lynch chart is clashing PERFECTLY with the Bank of America trend line, and excluding 2008, every time it has met with the trend line, the stock has gained significantly. I have attached the chart below:
Now let’s look at the numbers. Bank of America was VERY depressed this year. Posting -60% EPS from last year, and a -6.6% Q/Q sales would normally make an investor shy away from any stock. However, Bank of America is expected to post a positive EPS of 1.57 next year (up from 1.35), and an EPS increase of +9.29%. Bank of America is also -7.02% below its 52 week high, and as you can see in the chart above, the stock is always well below its 52 week high when it has a breakout run.
Ultimately I believe that BAC will have a really incredible run – especially since there’s finally been an increase in the interest rate (albeit an incredibly small one), and it is just a matter of finding the lowest price you can buy it at.