July 26, 2008 –
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RELATED TICKERS: BAC
, IMB
, CFC
Whew! It's been quite a couple of weeks since my last blog on BofA which claimed that $20 a stub was just too cheap not to pass up. Now that the share price has zoomed 50% (at one point this week it was almost 70% higher!) the suits in Charlotte have announced another $3.75b share repurchase plan. [more]
July 12, 2008 –
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RELATED TICKERS: BAC
, CFC
, IMB
Well, I thought that once Warren Buffett established his initial position at around $50 he'd keep buying more. But at these levels ($21) it's hard not to see the value in this company. Maybe he has stepped up recently to double down or maybe he hasn't. But I can't see why he wouldn't at least add to his position. So the CFC acquisition is gonna strain their cash flow for a bit as they settle debts for probably 50 c on the dollar with which they deduct up to $5b total purchase price in Countrywide - their $2b initial investment and $3b+ purchase - in losses over the next 20 years to shelter the income they are so good at generating by nickel-and-diming their account holders, of whom they now (post-CFC) have a 10.9% deposit share. While the dribs and drabs of fees from everyday account holders piles up tax-free, they'll be writing mortgages out the wazoo because with CFC, they have a 25% market share in mortgages and with IndyMac and all the little subprimers dropping like flies, who is going to be solvent enough to originate mortgages in America? So, though the production volume of the overall mortgage market may decline, Bank of America should be gobbling up market share Google-style. And as the mortgage and housing markets slowly gear up again... Mortgagees turn into checking accounts turn into business acounts turn into retirement accounts and the deposit base builds up organically until somebody finally enforces the 10% deposit base anti-monopoly bank law (Seriously, I thought the Fleet acqusition was the last "bank" BAC was "allowed" to buy and that was almost 10 years ago)
Downside here though lies in their credit card portfolio. Will the depth of the recession impact deiinquencies also on this front? Currently, the default rate on the CFC portfolio is around 8% (which is pretty bad but hence the discount) and I imagine Ken Lewis has it figured that even if that number goes to 15% he'd be alright. But what if the delinquincies on the old MBNA credit card portfolio approaches that too? And BofA's own mortgage and small business loan portfolio? Just how bad has he misjudged this recession?
I'm pretty confident though with this stock's PE trading at a 5 year low (9.13) and its dividend at an all-time high (currently 11.4%) that this de-facto monopoly national bank will stay solvent throughout this "financial crisis" and emerge an even more de-facto monopoly. I just wish Warren would swoop in and let me know that he was thinking that too. [more]
October 21, 2007 –
Here I was poised all week to write a blog entry about how the current international economic climate demanded a heavier weighting towards foreign stocks, and then two things happened on Friday to dampen my enthusiasm. First, there was that little 300+ point drop that thankfully I was able to avoid watching hour-by-hour as I was on a worksite the whole day. And second, I just noticed that David Gardner has started a new service that addresses a sector that I was gonna bang the drum on: Asia Rising. [more]
October 13, 2007 –
If you're lucky enough like me to have a solid portfolio foundation in American stalwarts such as Bank of America, Berkshire Hathaway, Sears, and Apple Computer, the clear path to market-beating returns lies solely in the research and selection of small cap names. And though I have heard it for years and years, it has never been made so apparent to me than in my CAPS selections. [more]
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