A strong argument can be made that every portfolio should include a stock from the financial sector. As one of the larger sectors, banks move the market in both positive and negative ways. The financial meltdown of late 2008 was the result of the financial institutions and in March of 2009 the stock market had an amazing 30% run up as a result of the financials. They truly do move the market.
Which brings us to our 3rd stock. This stock has gone from one of the most hated stocks to one of the most loved. While companies like JP Morgan Chase, under great leadership, were able to weather the storm without being affected too adversely, others either went bankrupt or knocked on the door of bankruptcy. Bank of America (BAC) was one of those.
In 2008 before the financial meltdown, Bank of America was over $50 and by February of 2009, it was nearly bankrupt selling at $2.53. Due to a lot of exposure in the risky investments that brought down so many banks, BAC became the black sheep of the sector.
Add to that the merger of Merrill Lynch at the height of the meltdown at the request of the government, it’s not hard to see why this stock joined the ranks of the lesser known penny stocks.
All of this caused Bank of America to refocus on being a bank. Wealth management, and responsible mortgage lending as well as brokerage services became the focus. This has caused a turnaround in the company that has taken Bank of America’s shares to almost $13.
Still, though, remnants of the past remain. Commerical mortgages as well as credit cards are hurting the bank but as the real estate market improves, Bank of America will continue it’s run higher. The dividend isn’t good but the growth potential is huge.
It’s important to note that we could easily see some downside on this. It will take a while to see the results of this buy but it will come.
As a result of a less than stellar quarterly report, I’m buying on the dip. 200 shares at $12.89.
If you don’t know about the No Hassle Portfolio, you can read the last two entries below:
Click here to read entry #1
Click here to read entry #2