Will biggest hedge funds back Bank of America Corp (NYSE:BAC) in Q2?
It seemed like the pulse in the market about Bank of America Corp (NYSE:BAC) was a healthy one. Most major hedge funds considered BAC to be a long-term stock pick. Even in the Q1, the bank had been one of the favorite stocks among hedge funds. No doubt the earnings had been low on a trailing basis, but that too seems to have recovered.
In the last quarter, there was a 60% rise in the net income, in comparison to the 2012 Q2. Even though the stock price almost doubled over the past one year, it is valued at significant discount-to-book and has a 0.7 P/B ratio.
Analysts are of the opinion that, going forward, BAC’s earnings will continue to gain health. This the P/E based on the projected earnings for 2014 is 11. In absolute terms, this seems a little low. This indicates that in reality BAC is priced at a premium in forward-earnings terms in comparison to some other large banks such as Citigroup and JP Morgan Chase.
This view or that
Despite the discount relative to its book value, it would be a better idea to compare the BAC stock to its peers in the context that generally, megabanks could be susceptible to a Federal Reserve policy that is less accommodative. This, in view of the fact that the central bank will refrain from tightening their purse strings.
In a broader perspective, the larger banks definitely seem viable and look like they will be able to offer a value proposition that is interesting enough, but Bank of America Corp (NYSE:BAC) needs to be researched a little further. At the moment, even the general public looks upon BAC with disdain and it has been trying its level best to change that perception and it started 2013 with a spanking new customer care program. However, latest customer satisfaction polls have lambasted its image.