Message Font: Serif | Sans-Serif
 
No. of Recommendations: 5
I agree that the generalities are not useful, but the numbers back the argument.

BAC had a book value of 21.48$ per share in their 2009 Annual Report. The Goodwill Impairment Charge of 10,4 BN in 3Q10 is an indication that the NBV was somewhat over-valued however at the end of the day, your are buying a company which is trading profitably (excluding non-cash write-offs) at bellow book value.

The only reasonable argument for not recommending BAC is if you believe that future losses will a) preclude the bank from paying out future dividends and b) that these future losses minus any dividends paid out, will wipe out the NBV to such an extent that, even if the bank decides to divest its assets, it will not manage to get back its current share value from the sale.

There are clouds over the horizon and I don't see BAC becoming a Wall-Street darling any time soon, however if you want to buy a share of a powerful company for the long term, this might be an opportunity to do so.

My argument is not refined as it does not take into account the opportunity-cost of money but none the less, things would have to go very wrong for this company to produce the results which are projected by its current share price.

I am a brand new investor and have not bought any shares yet, however BAC will be one of the first 10 I buy.

Anybody think I am making a mistake? I would really like to know.

Dimitri Galani - Athens, Greece
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.