Can B of A really do worse next year?

The battered financial has nowhere to go but up -- if you believe Wall Street price targets.

By InvestorPlace Dec 30, 2010 1:51PM
By Jeff Reeves, Editor of

top 10 stocks for 2011There's no shortage of articles offering the best stock picks for the new year. But allow me to throw one more on the pile before the ball drops with my recommendation of Bank of America (BAC). Why B of A? In a nutshell, I don't think things can get much worse for the battered bank.

Admittedly, this is a bit of a risky call, despite BAC rising about 17% in the past month. Bank of America has many problems in many areas, from a backlog of foreclosures to new regulations to Uncle Sam's ownership stake to plain old bad PR. But if you don't want any risk, you simply shouldn't be buying individual stocks in the current volatile market.

There are plenty of reasons to talk yourself out of buying B of A. But here are the three big reasons I found that talked me into buying:

How much worse can things get? Bank of America's five-year return has delivered something close to a 70% loss, and it’s off more than 30% from its 2010 high around of $20. Clearly, Wall Street is painfully aware of the problems facing BAC. Just as I believe too much success is already baked into some overbought tech stocks (that’s another story), I believe plenty of failure has been baked into BAC. Frankly, what surprises are there left that would revise Wall Street’s negative outlook on this stock any lower?

The 'experts' have targeted 50% gains on average. Trust me, I’m as skeptical of expert analysts as the next guy. But for what it’s worth, out of 26 analysts with targets on BAC stock, every single one has predicted an upside to shares, according to Thomson/First Call. The low target is $13 (about where the stock is now), and the high is $26, with an average of $18. The fact that even the worst forecast on Wall Street is for zero downside is worth noting.

Possible dividend boost in 2011. According to Bank of America executives, the company’s balance sheet is shored up and a dividend is likely. CEO Brian Moynihan hinted on Dec. 7 at a Goldman Sachs conference that a dividend increase was a possibility. What’s more, the Federal Reserve seems ready to sign off on increased dividend payments for banks that took TARP cash (the healthy ones only, of course) for the first time since the financial crisis. Not only would a bigger dividend payout be nice for shareholders, but the buying pressure created by income-hungry investors could be doubly fortuitous for BAC stock. As more investors have chased dividends, news that Bank of America will be delivering a better yield could create a bump in buying pressure.

Full disclosure: To show I'm putting my money where my mouth is, I just purchased BAC at $13.30 on Thursday, Dec. 30. We'll see in 12 months whether it was a wise move.

Get three more reasons from Jeff on why BAC stock is a buy. And Check out all 10 free stock picks that make up's Best Stocks for 2011.

Jeff Reeves is editor of Follow him on Twitter at

Dec 30, 2010 2:18PM
The way Bank of America treats it customers they will need to change from the top down. A complete restructuring of the way they treat its most important assets....the customers.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
262 rated 2
480 rated 3
651 rated 4
649 rated 5
629 rated 6
616 rated 7
496 rated 8
346 rated 9
111 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.