BAC-WT - Bank of America Warrants

[Uccmal]

Regarding market capitalization, according to Google Finance BAC is currently 158.51B and Wells Fargo is 236.19B. So if BAC reaches WFC's CURRENT capitalization, it will trade at $22. Why this is weird or unusual is beyond me. Why if the stock goes to $22 it can't go to $30 is also beyond me. Why if the stock reaches $30 it can't go to $40 or $50 in a few years is also beyond my understanding.

 

 

Because for that to happen (not necessarily 22 but the comparison of moving equal to WFC that you speak of) BAC needs to be at least as profitable as WFC - and it won't get there by just new BAC I, II and wind-down of LAS/Litigation. For that they need to truly amp up revenue generation in the way that WFC has been able to.

 

I hope they will.

 

 

I too hope they reach $30 but that implies that it keeps running on all cylinders indefinitely. 

 

RE: buybacks per Q.  I have read both CC transcripts since they got approved for buybacks, and no mention has ever been made on any timing restrictions. 

 

Anyway, Portfoolio, I hope I am wrong and you are right.

 

I still hold about 70000 notional between all of our accounts.  Anything beyond what I have made to date will be gravy. 

 

see you in two weeks.  I am off backpacking in the Yukon in a few minutes. 

 

sent from Whitehorse, YK. 

[Uccmal]

BTW: you may want to pare your portfolios.  When I am off the grid markets usually plummet.  :-)

[jay21]

More Americans Living in Others' Homes

 

http://online.wsj.com/article/SB10001424127887324263404578613641302074464.html?mod=WSJ_article_comments#articleTabs%3Darticle

 

"The number of so-called missing households—representing adults who would be owning or renting their own home if household formation had stayed at normal rates since the recession—has increased 4% over the past year, according to an analysis for The Wall Street Journal. "

 

When will the pent up demand be unleashed? 

[fareastwarriors]

The Rise of the Young Buyer

 

A new generation is skipping the 'starter home' and betting heavily on high-end real estate..

 

http://online.wsj.com/article/SB10001424127887324879504578601711248140752.html?mod=WSJ_3Up_RealEstate

[fareastwarriors]

http://online.wsj.com/article/SB10001424127887324144304578624331793965730.html?mod=WSJ_hp_LEFTWhatsNewsCollection

 

 

Easing of Mortgage Curb Weighed

 

Regulators are concerned that tougher mortgage rules for banks could hamper the housing recovery. .

 

 

Concerned that tougher mortgage rules could hamper the housing recovery, regulators are preparing to relax a key plank of the rules proposed after the financial crisis.

 

The watchdogs, which include the Federal Reserve and Federal Deposit Insurance Corp., want to loosen a proposed requirement that banks retain a portion of the mortgage securities they sell to investors, according to people familiar with the situation.

 

The plan, which hasn't been finalized and could still change, would be a major U-turn for the regulators charged with fleshing out the Dodd-Frank financial-overhaul law passed three years ago.

 

 

[fareastwarriors]

http://www.bloomberg.com/news/2013-07-24/bank-of-america-adds-rose-de-weck-to-board-amid-overhaul-1-.html

 

 

Bank of America Adds Rose, de Weck to Board Amid Overhaul

 

 

 

Bank of America Corp., the second-biggest U.S. lender by assets, expanded its board by naming former Wall Street bankers Clayton Rose and Pierre de Weck as directors.

 

Rose, 54, a former JPMorgan Chase & Co. (JPM) executive, is a professor of management practice at Harvard Business School, Bank of America said today in a statement. De Weck, 63, was chairman and global head of private wealth management at Deutsche Bank AG (DBK) and held senior posts at UBS AG and a predecessor of Citigroup Inc., the Charlotte, North Carolina-based firm said.

 

 

[portfoolio]

Does anyone know Morgan Stanley Betsy Graseck's current price target? She is the sharpest analyst I've seen recently on big banks. They took her question first in the conference call and it was the best question. Of course they took Mike Mayo last. Here is the article with info on the upgrades:

 

http://www.valuewalk.com/2013/07/morgan-stanley-large-cap-banks/

 

 

[fareastwarriors]

Does anyone know Morgan Stanley Betsy Graseck's current price target? She is the sharpest analyst I've seen recently on big banks. They took her question first in the conference call and it was the best question. Of course they took Mike Mayo last. Here is the article with info on the upgrades:

 

http://www.valuewalk.com/2013/07/morgan-stanley-large-cap-banks/

 

 

Overweight BAC on improving housing and

execution of cost saves program. We see 12%

upside potential to our $16 price target with rising

bias towards our $20 bull case that offers 40%

upside as we expect the market will begin to look

forward 2-yrs to BAC’s full earnings power of $2.00+

in our view.

 

Investment Conclusion: BAC punched out a double

digit ROTCE (10.3%) for the first time in 3 yrs but current

valuation of $14.31 suggests the market does not have

confidence that BAC can sustain this level of return

(market pricing in 8.8% ROTCE). We disagree and

expect rising ROTCE to 11.4% and 13.8% in 2014-15.

2Q13 results demonstrate mgmt’s laser focus on

expense saves while reinvesting in the business. Top

line growth of 4% y/y while delivering on expense saves

causing bears to rethink their topline deterioration

thesis. Fwd estimates up on better NCOs and pull

forward of LAS expense saves.

 

BAC looks cheap at 0.64x P/2014 BV and 0.93x

P/2014 TB. Our $16 price target reflects 0.71x 2014e

BVPS on 7.5% ROE and 1.0x 2014 TVPS on 11%

ROTCE. Catalysts are shrinking distressed housing

inventory, delivering on expense reduction, HPI

improvement and rising rates.

 

What’s new? BAC reported 2Q13 EPS of 32c, 4c better

than our above consensus estimate of 28c and 7c above

consensus. DVA gains <1c. Beat on expenses by 1c,

provisions by 4c (2c each from NCOs and reserve

release). Partial offset is a 2c reduction to our above

consensus revenue line. NIM up 3bp q/q to 2.44%, 2 bp

better than est.

 

Changes to our Estimates: 2013e EPS up 2c to $1.00

(6% above st) and 2014e up 2c to $1.51 (16% above st)

on lower NCOs and faster LAS expense decline.

[portfoolio]

 

Overweight BAC on improving housing and

execution of cost saves program. We see 12%

upside potential to our $16 price target with rising

bias towards our $20 bull case that offers 40%

upside as we expect the market will begin to look

forward 2-yrs to BAC’s full earnings power of $2.00+

in our view.

 

Thanks! She's very very sharp, so this is very encouraging to me.

[sswan11]

Dick Bove says banks a little pricey due to 2nd qtr core earnings:

 

http://finance.yahoo.com/news/bove-buying-banks-dangerous-investing-132632129.html

[portfoolio]

Dick Bove says banks a little pricey due to 2nd qtr core earnings:

 

http://finance.yahoo.com/news/bove-buying-banks-dangerous-investing-132632129.html

 

Dick Bove predicted that bank earnings would be "sloppy" before earnings report. They came out and the bank stocks went up. BAC went up A LOT. He is a clueless hack who is right like a stopped clock, nothing else. Just because someone can get on CNBC doesn't mean that person has the slightest insight into anything.

 

The comments in the article you cite aren't even logically consistent. He made a bad call before earnings reports and he is saying dumb stuff now after the earnings report.

[Sunrider]

@Eric

 

I'm curious if you've done anything with your puts and whether you've started selling calls (e.g. at $20)? I've been hedging part of my position with way out of the money puts to the end of this year but the one thing I found quite disturbing is the high cost of the trade in terms of fees (compared to the money invested). Buying a 200 or 300 puts that only cost 10 - 20c easily incurs fees as high as 3 - 7% of the trade. I'm with IB so I always thought they were as cheap as it gets but I thought I'd see what your experience is in this regard?

 

Thanks - C.

[ericd1]

Anybody know offhand when the '16 leaps become available?  Thanks in advance...

[wescobrk]

Anybody know offhand when the '16 leaps become available?  Thanks in advance."

 

I'm sure someone will post a link like last year with the exact date.

It'll be between August and October.

I think last year was mid October.

I'm not sure I'll be buying any as I think we'll see north of $20 a share by next year. I'll probably switch to the common at that point or a nominal amount of leaps. Once it gets into the 20's it'll be just like any other stock--in the range of being fairly valued.

[portfoolio]

Once it gets into the 20's it'll be just like any other stock--in the range of being fairly valued.

 

I appreciate people sharing clear-headed assessments like that.

[LC]

Once it gets into the 20's it'll be just like any other stock--in the range of being fairly valued.

 

I appreciate people sharing clear-headed assessments like that.

Yea I mean, once it trades around BV it's probably fairly valued. The majority of their problems are behind them and it should trade probably around .9-1.2x book, which is a range of about 18-23/share. Over the next Qs I think we will see the market processing the improved financials and moving toward this range.

[racemize]

Once it gets into the 20's it'll be just like any other stock--in the range of being fairly valued.

 

I appreciate people sharing clear-headed assessments like that.

Yea I mean, once it trades around BV it's probably fairly valued. The majority of their problems are behind them and it should trade probably around .9-1.2x book, which is a range of about 18-23/share. Over the next Qs I think we will see the market processing the improved financials and moving toward this range.

 

They will have a lot of DTA juicing the returns though, offset by the lower leverage perhaps.

[wescobrk]

Yea I mean, once it trades around BV it's probably fairly valued. The majority of their problems are behind them and it should trade probably around .9-1.2x book, which is a range of about 18-23/share. Over the next Qs I think we will see the market processing the improved financials and moving toward this range"

 

I'm running a risk of underestimating them. There are only 3 other big banks and that moat around the big 4 is rock solid. There won't be any more large banks than 4 (BOFA, JPM, C ande WFC). There is too much regulation. If for some reason BAC (and the big 4) can grow a little above nominal GDP for a period of time (say 5 years) then they should trade a tad above the S&P 500, even though they won't have near the leverage as the past.

 

Their profit stream is rock solid now because of dodd frank preventing competitors. We could actually see 16x multiple if they can grow a little above gpp for a few years which means we could see $32-35 a share around 2015.

 

I'm not smart enough to figure that out though. I look for the one foot hurdles. It's still trading only around 7x earnings with a rock solid moat. There's still money to be made but I'll probably reduce it to 5% of my portfolio when it trades above book even though I risk losing more upside.

 

Maybe the board can identify another absurdly priced stock by the market by then. Ideally, Buffett will do it for us like BAC. He even spelled it out in the annual report it'll generate significant value and the whole world still ignored him!

 

ahh, efficient markets, thank god there are some people that still think that so people on this board (me included) can make a lot of money.

[kevin4u2]

Once it gets into the 20's it'll be just like any other stock--in the range of being fairly valued.

 

I appreciate people sharing clear-headed assessments like that.

Yea I mean, once it trades around BV it's probably fairly valued. The majority of their problems are behind them and it should trade probably around .9-1.2x book, which is a range of about 18-23/share. Over the next Qs I think we will see the market processing the improved financials and moving toward this range.

 

What is your basis for BAC being fairly valued at or around book value? Thanks.

[ericd1]

Thanks guys -- I like the thought of $20 soon, but would still consider some 16's depending on the premium/leverage as I have a couple of 14's I haven't rolled into 15's...Like to keep my options (no pun intended) flexible. 

 

Also until another oppty shows up I'm ok not paying taxes on the gain.

[LC]

Once it gets into the 20's it'll be just like any other stock--in the range of being fairly valued.

 

I appreciate people sharing clear-headed assessments like that.

Yea I mean, once it trades around BV it's probably fairly valued. The majority of their problems are behind them and it should trade probably around .9-1.2x book, which is a range of about 18-23/share. Over the next Qs I think we will see the market processing the improved financials and moving toward this range.

 

What is your basis for BAC being fairly valued at or around book value? Thanks.

Mostly a comp analysis between WFC USB and JPM, and I see no reason why it shouldn't trade at around book once the legacy issues are fully resolved given their deposit base and current banking environment. With more oversight, retail banks are only going to be able to do so much.

 

Or if you invert the question into, "Why should BAC trade at a significant discount to book?" I cannot think of any substantial answers. Three or even two years ago you could have made a case for a discount, but with the progress they've made since then it is a harder question to answer.

[gokou3]

Anybody know offhand when the '16 leaps become available?  Thanks in advance...

 

I looked before.  For 2016, the date is Oct. 14... don't have the link though.  They are category 2 stocks in terms of LEAP availability.

[ERICOPOLY]

@Eric

 

I'm curious if you've done anything with your puts and whether you've started selling calls (e.g. at $20)? I've been hedging part of my position with way out of the money puts to the end of this year but the one thing I found quite disturbing is the high cost of the trade in terms of fees (compared to the money invested). Buying a 200 or 300 puts that only cost 10 - 20c easily incurs fees as high as 3 - 7% of the trade. I'm with IB so I always thought they were as cheap as it gets but I thought I'd see what your experience is in this regard?

 

Thanks - C.

 

It's a high percentage of the put cost, but I'm expecting to lose the entire dollar amount invested in the puts anyhow.  Same as I expect to lose all of the interest I pay on a home mortgage or student loan.  So once you figure that you're going to lose it anyhow, losing a bit more doesn't seem to out of phase with the strategy.

[sswan11]

2016 LEAPS:

When are the exchanges going to list 2016 LEAPS®?

Cycle 1:

 

Monday, September 16, 2013: January 2016 LEAPS® listed

Cycle 2:

 

Monday, October 14, 2013: January 2016 LEAPS® listed

Cycle 3:

 

Monday, November 11, 2013: January 2016 LEAPS® listed

 

http://www.optionseducation.org/tools/faq/leaps_cycles.html

[portfoolio]

When thinking about book value, it's important to consider the possibility that the next 18 months will see a gradually improving world economy with a real estate market in the US that also continues to improve. That's 18 months of legacy issues fading away and profits increasing. You'll also see interest rates normalizing. In this kind of environment, where a healthy dividend will soon be paid to shareholders, why won't BAC trade to a healthy premium to book value?