Top picks 2013: Bank of America
This out-of-favor financial appears set for a long-term turnaround.
By Mike Cintolo, Cabot Top Ten TraderMy choice for a favorite stock in last year's Top Picks report was Lennar (LEN), which has since risen 96%. That selection stemmed from my belief that the housing sector was poised for a big turnaround. We now rate the stock a hold. We don't see anything wrong with Lennar, but we also don't see lots of upside power at this point.
For 2013, I see another much-hated group ready to turn up — financials. That's why I'm making Bank of America (BAC) my pick for the coming year.
As a group, the big banks have now had five full years to shape up. They've been helped along by an incredibly easy Federal Reserve (now buying $40 billion of mortgage debt every month) and, ironically, a housing rebound, which has improved many firms' balance sheets.
And, though most investors don't know it, earnings for the group are buoyant.
As for Bank of America itself, it's likely to pass an upcoming stress test and finally be able to return $5 billion to $10 billion to shareholders through a dividend boost and share repurchases.
Throw in the fact that earnings are projected to leap 129% next year to 96 cents per share, and the fact that the stock actually hit new yearly highs in December (even as the market was struggling), and it's clear to me that the turnaround is underway.
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