BAC-WT - Bank of America Warrants

[fareastwarriors]

I might trim a bit at 15$ but I also want to see 2Q first and see things are trending before I do anything major.

[claphands22]

Probably not a useful post for most people here. This is one way to derive a bank valuation, not the best but one way.

 

A company's valuation is based on earnings. A reasonable estimation of what a large deposit taking bank can earn is based on their tangible equity (as long as their capital levels are conservative.)

 

Take a look at the return on tangible equity of large deposit taking banks (ones that currently aren't undergoing above average provisioning or are gunked up with law suits) they will have similar returns on tangible equity.

 

Take the tangible equity per share of BAC, multiply it by a conservative and reasonable estimation of what other banks return on tangible equity are. That's your estimated EPS.

 

What kind of multiple will you pay for a company that will grow as much as the GDP but not anymore and faces less obsolescence risk than an average company? Take this multiple and handicap it for two-to-three years of below average returns on tangible equity while pig goes through the python. That's your multiple.

 

your estimated EPS * Multiple = IV per share

 

If you sell it because it has reached tangible equity per share, that is not what I would call value investing, but market timing. Sell if you have something that is cheaper and you feel more comfortable with or sell it if it no longer has the MoS you want: adjust all things for tax consequences. Selling a bank because it has reached tangible equity doesn't seem completely reasonable to me.

 

That being said, I might sell some  ;)

[ERICOPOLY]

I am disappointed that the stock is at $13.35 with all this talk of a mega-bubble building in the markets over on the other thread.

 

It's going a lot higher in order to catch the market if stocks are that overvalued.  10x forward earnings isn't bubble territory.

 

EDIT:  Especially when the 10x is only 10% ROTE.

[kevin4u2]

I am disappointed that the stock is at $13.35 with all this talk of a mega-bubble building in the markets over on the other thread.

 

It's going a lot higher in order to catch the market if stocks are that overvalued.  10x forward earnings isn't bubble territory.

 

Buying today is still cheap.  The company can and will earn 15% on tangible equity over time.  What's not to like about a 15% return on your investment?  That is 6.6 times normal earnings making this one an easy double with zero growth required.  Can't find that anywhere in this market.

 

What will be especially interesting is how lean and efficient BAC will be coming out of this crisis.  The bank has never been this well capitalized.

 

 

[jay21]

I am disappointed that the stock is at $13.35 with all this talk of a mega-bubble building in the markets over on the other thread.

 

It's going a lot higher in order to catch the market if stocks are that overvalued.  10x forward earnings isn't bubble territory.

 

EDIT:  Especially when the 10x is only 10% ROTE.

 

I think we can find plenty examples of this.  If we went through the DOW stock by stock, I would think people would be less likely to call the market overvalued.  (choose the DOW because S&P 500 is too much work).

[kevin4u2]

I am disappointed that the stock is at $13.35 with all this talk of a mega-bubble building in the markets over on the other thread.

 

It's going a lot higher in order to catch the market if stocks are that overvalued.  10x forward earnings isn't bubble territory.

 

EDIT:  Especially when the 10x is only 10% ROTE.

 

I think we can find plenty examples of this.  If we went through the DOW stock by stock, I would think people would be less likely to call the market overvalued.  (choose the DOW because S&P 500 is too much work).

 

I would have to disagree. I take a look through the Dow 30 every quarter and many of those stocks are selling at very healthy multiples based on peak cycle profit margins. If current profit margins are a new normal then and only then are they fairly valued. I shutter at the thought of a "new normal". Take a look at DD and MCD for examples of peak margins and healthy 15x multiples.

 

[ERICOPOLY]

Has anyone else noticed that we get less info from BAC these days?

 

JPM had an investor day.  BAC did not.

JPM posted UBS Global Financial Services Conference webcast on May 14th.  BAC did not.

JPM posted Citi 2013 US Financial Services Conference webcast on Mar 5th.  BAC did not.

 

BAC has not been busy lately on this front.  BAC has only posted annual and quarterly earnings presentations thus far this year, and beyond that they seem to have no further comment.  I admit I'm kind of used to the relatively frequent stream of information coming out of these conferences, and this is boring.

 

[ericd1]

Nothing wrong with this boring company.  I'd like to find more like it!

[wescobrk]

Has anyone else noticed that we get less info from BAC these days?

 

JPM had an investor day.  BAC did not.

JPM posted UBS Global Financial Services Conference webcast on May 14th.  BAC did not.

JPM posted Citi 2013 US Financial Services Conference webcast on Mar 5th.  BAC did not.

 

BAC has not been busy lately on this front.  BAC has only posted annual and quarterly earnings presentations thus far this year, and beyond that they seem to have no further comment.  I admit I'm kind of used to the relatively frequent stream of information coming out of these conferences, and this is boring."

 

What are your thoughts on why they are so quiet?

 

[Uccmal]

Yesterday, I installed 200 January 2014 $12.00 BAC puts to protect 50% of my leaps position. 

 

Total cost 20000* 0.61 = 13000.

 

Gain required in the BAC common to overcome the drag:  0.61 cents for those 200 Leaps. 

 

I didn't want to sell anymore and The 13 G will be a wash come tax time.

[ERICOPOLY]

Has anyone else noticed that we get less info from BAC these days?

 

JPM had an investor day.  BAC did not.

JPM posted UBS Global Financial Services Conference webcast on May 14th.  BAC did not.

JPM posted Citi 2013 US Financial Services Conference webcast on Mar 5th.  BAC did not.

 

BAC has not been busy lately on this front.  BAC has only posted annual and quarterly earnings presentations thus far this year, and beyond that they seem to have no further comment.  I admit I'm kind of used to the relatively frequent stream of information coming out of these conferences, and this is boring."

 

What are your thoughts on why they are so quiet?

 

WFC has also done two conferences so far this year.  BAC is just absent.

 

[nkp007]

Has anyone else noticed that we get less info from BAC these days?

 

JPM had an investor day.  BAC did not.

JPM posted UBS Global Financial Services Conference webcast on May 14th.  BAC did not.

JPM posted Citi 2013 US Financial Services Conference webcast on Mar 5th.  BAC did not.

 

BAC has not been busy lately on this front.  BAC has only posted annual and quarterly earnings presentations thus far this year, and beyond that they seem to have no further comment.  I admit I'm kind of used to the relatively frequent stream of information coming out of these conferences, and this is boring."

 

What are your thoughts on why they are so quiet?

 

WFC has also done two conferences so far this year.  BAC is just absent.

 

Maybe they can now fully focus on the business versus the media circus. It's a good thing. Same with AIG.

[PlanMaestro]

http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=77974&terms=@ReutersTopicCodes+CONTAINS+'ANV'

[MrB]

Bank of America Assisted 366,000 Customers With National Mortgage Settlement Programs Through March 31

Bank Believes Consumer Relief Provision Has Been Exceeded; Continues Outreach to Offer Assistance to Remaining Eligible Customers

 

http://finance.yahoo.com/news/bank-america-assisted-366-000-140200070.html

[goldfinger]

Moynihan speaks about BAC at the Sanford Bernstein Conference:

http://seekingalpha.com/article/1472281-bank-of-america-s-ceo-presents-at-sanford-c-bernstein-29th-annual-strategic-decisions-conference-transcript?part=single

[fareastwarriors]

Bull Sees Red Over BofA Cross-Sales .

 

http://online.wsj.com/article/SB10001424127887324682204578515220227705716.html?mod=WSJ_Markets_LEFTTopStories

[Olmsted]

Bull Sees Red Over BofA Cross-Sales .

 

http://online.wsj.com/article/SB10001424127887324682204578515220227705716.html?mod=WSJ_Markets_LEFTTopStories

 

To summarize, cross-selling between a brokerage and its parent has not worked before, and is unlikely to work here.  There is culture friction between Merrill brokers and BAC, procedural delays frustrate clients who have been referred to BofA products, and a general tendency of brokers to closely guard their client relationships.  Oh well, I have always viewed success in cross-selling as just a bonus to the thesis here.  I am fine with BAC and Merrill just plugging along.

[nkp007]

Bull Sees Red Over BofA Cross-Sales .

 

http://online.wsj.com/article/SB10001424127887324682204578515220227705716.html?mod=WSJ_Markets_LEFTTopStories

 

To summarize, cross-selling between a brokerage and its parent has not worked before, and is unlikely to work here.  There is culture friction between Merrill brokers and BAC, procedural delays frustrate clients who have been referred to BofA products, and a general tendency of brokers to closely guard their client relationships.  Oh well, I have always viewed success in cross-selling as just a bonus to the thesis here.  I am fine with BAC and Merrill just plugging along.

 

Agreed. I doubt it will happen in a substantial way.

[nkp007]

Moynihan speaks about BAC at the Sanford Bernstein Conference:

http://seekingalpha.com/article/1472281-bank-of-america-s-ceo-presents-at-sanford-c-bernstein-29th-annual-strategic-decisions-conference-transcript?part=single

 

I'm reading through this transcript and it says "our results further we could buy $5 billion in common and redeem preferred and we're going to".

 

How come they haven't bought anything back yet? It annoys me that Moniyhan is diluting current shareholders and STILL not buying back shares as the price creeps up. What could he possibly be waiting for?

[hyten1]

anyone doing long put spread on BAC stock to protect for the downside (or should this be done in the name of protection).

 

i am thinking of ways to put in some hedges for some of my biggest holdings

 

for example:

 

sell jan 14 $13 puts for $1 premium

buy Jan 14 $14 puts for $1.5 premium

 

so you spend $0.50 per share

 

if stock > $14 you lost $0.50 per share (cost of protection)

if stock > 13 < 14 (you can be up max approx $0.50 or down max total $0.50 which is original spend)

if stock < 13 you will be force to buy BAC but at a increasing lower price as the stock drops. (for example if stock is $13, you be force to buy it at $13 and then plus original $0.50 spend that is $13.5, but since your $14 put is now prob worth $1 so your cost base is actually $12.5, now if stock drop to $12, your cost base is now $11.5 etc.)

 

seem better than just buying a put at $12 (cost $0.64), at $13 (cost $1), or at $14 (cost of $1.50)

 

for the options/hedging gurus does this make sense?

 

 

hy

[xazp]

I'm not reading his statement the way you are.  Future results will include $5Bn in buybacks, he says.  To me his statement includes the possibility of Q2 buybacks, which are not-yet released results.  We will see. 

 

Moynihan speaks about BAC at the Sanford Bernstein Conference:

http://seekingalpha.com/article/1472281-bank-of-america-s-ceo-presents-at-sanford-c-bernstein-29th-annual-strategic-decisions-conference-transcript?part=single

 

I'm reading through this transcript and it says "our results further we could buy $5 billion in common and redeem preferred and we're going to".

 

How come they haven't bought anything back yet? It annoys me that Moniyhan is diluting current shareholders and STILL not buying back shares as the price creeps up. What could he possibly be waiting for?

[wescobrk]

If that's true I hope he is fired by the end of the year.

 

He could have had the entire buyback completed by the end of April.

He said it would begin in q2 which means april 1st.

He's going to look like a fool if he is still waiting when the stock hit 13.99 today and he could have completed the buyback in the 11's and 12's.

 

Moynihan has done a great job but he isn't indispensable.

They could find someone more talented if they started searching.

[Uccmal]

If that's true I hope he is fired by the end of the year.

 

He could have had the entire buyback completed by the end of April.

He said it would begin in q2 which means april 1st.

He's going to look like a fool if he is still waiting when the stock hit 13.99 today and he could have completed the buyback in the 11's and 12's.

 

Moynihan has done a great job but he isn't indispensable.

They could find someone more talented if they started searching.

 

They could have done the complete buyback in two weeks, accounting for 25% of the daily float. 

[Uccmal]

anyone doing long put spread on BAC stock to protect for the downside (or should this be done in the name of protection).

 

i am thinking of ways to put in some hedges for some of my biggest holdings

 

for example:

 

sell jan 14 $13 puts for $1 premium

buy Jan 14 $14 puts for $1.5 premium

 

so you spend $0.50 per share

 

if stock > $14 you lost $0.50 per share (cost of protection)

if stock > 13 < 14 (you can be up max approx $0.50 or down max total $0.50 which is original spend)

if stock < 13 you will be force to buy BAC but at a increasing lower price as the stock drops. (for example if stock is $13, you be force to buy it at $13 and then plus original $0.50 spend that is $13.5, but since your $14 put is now prob worth $1 so your cost base is actually $12.5, now if stock drop to $12, your cost base is now $11.5 etc.)

 

seem better than just buying a put at $12 (cost $0.64), at $13 (cost $1), or at $14 (cost of $1.50)

 

for the options/hedging gurus does this make sense?

 

 

hy

 

Hi hyten, My post above discusses my actions.  Since then I have bought 100 more put contracts with 2015 expiry.  $12.00.  My total position is 50 % protected.  My leaps are 75% protected. 

 

I am working on the premise that the stock price gets to around $20 by 2015.  This insurance will seem pretty cheap by then.  Plus I can offset my gains with the losses on the puts. 

 

If the stock tanks for some reason then I will be able to generate cash when it is most useful. 

 

On an after tax basis the insurance will likely cost me nothing. 

 

I guess the worse case, is if the stock sits between 12 & 14 for the next year.  Since stocks seldom meander sideways that long I think I am okay there. 

[PlanMaestro]

BAC and AIG line up in subprime battle.

http://on.ft.com/10RPlWd