Bank of America (BAC) ($38.41)
by Kevin P Parke
P/E Ratio: 10.3
Dividend yield: 2.56
Company pros and cons
Bank of America is a large and growing organization with a well diversified range of business functions. They have weathered the sub-prime mortgage crisis to this point and have been able to continue their operations while keeping pace with the declining market. They also made a $2 billion investment in Countrywide Financial to help rescue Countrywide from the credit crunch, giving them a large stake in the nation’s largest independent mortgage lender. After stating for months that there was no intention to acquire, recent talks have indicated that Bank of America may rescue the still financially declining Countrywide from bankruptcy through an acquisition.
Bank of America’s stock price has hovered around $48 – $50 over the past 2 years; however, recently it has decreased from $51 in October 2007, to $38 in January 2008. In the face of increasing energy prices (oil over $100 per barrel) decreased consumer spending, and an increasing unemployment rate, although over the long term I believe that Bank of America is a good investment to make, current market conditions are unfavorable. Although the Fed is in the midst of an interest rate cutting spree that I believe will continue until financial markets begin to make some kind of recovery. Present market conditions are less conducive to a profitable investment in Bank of America.