Bank of America Citigroup Duel
Bank of America (BAC) pulled back right after it overtook Citigroup (C) as the largest bank by market cap a few days ago as CFO Alvaro De Molina. Since then, Bank of America has slid from above $54 to below $52.5 at a time when there have been several catalysts for banks. Sure it’s a great loss, but I believe this selloff is more of a panick than Bank of America not being the best bank to own anymore. Just yesterday, the huge merger deal between Bank of New York (BK) and Mellon Financial (MEL) boosted the financial sector. Even Citigroup was up on this news while Bank of America is down? (Bank of Amercia should only trade higher or in-line with Citigroup, never trade lower- its an atrocity). Today, the ISM Services reported a great upside surprise, signaling the financial sector as well as the other service sectors are doing great and yet Bank of America is still down. What to do?
BUY BANK OF AMERICA, symbol BAC! With a 4.2% yield, people will be flocking to this best of breed stock as bond rates are new this yield and continue to fall as we anticipate a rate cut by the Federal Reserve sometime next year. Speaing of rate cuts, when that does happen, bank stocks will be the place to be since banks make more and more money as the Federal Reserve continues to cut rates. Bank of America should hit $65 on these two points alone by late next year. That’s about a 25% gain plus the 4.2% yield and you’d be getting near a 30% gain on a blue chip big cap. Not too shabby.
Oh, don’t forget Bank of America’s recent $3.3 Billion deal to acquire Charles Schwab’s (SCHW) U.S. Trust.
In other news, Bank of America announced today that they will expand the free stock trading we talked about earlier to 30 additional states, mainly in the Midwest and Southwest.
So yeah, Bank of America seems to be hurting right now as people continue to dump shares due to the CFO resigning. This is the perfect time to start building up shares as they’ll be in high demand sometime next year.
Thoughts on My Other Financials:
Goldman Sachs (GS) - Took a big hit last week but I didn’t get to add to my shares. If it takes a hit again this week I’m buying. They report earnings on December 12th and it should be great, just like everytime it reports because the analysts never get the earning power of brokers right. This thing might go to $250 by year end.
American Insurance Group (AIG) - This one has stalled as well after hitting new highs recently. This is a screaming buy with targets of above $80 from many analysts.
