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mikecart1 (75.12)

Why C will Follow BAC and Rise To New Heights



August 10, 2009 – Comments (7) | RELATED TICKERS: BAC , C , ATVI

I could care less how many stars C has on this site.  I care about as much as I did when I loaded up on BAC shares when it had 2 or 3 stars back in March, back when the whole world was going to end and BAC was going to be nationalized, etc.  I care so less because I bank at both places.  I know them and don't see how such big companies will stay down for long.  I don't need balance sheets or people on TV telling me how good or bad they are.  I am a customer there lol.  It is like the same people trying to talk down on my favorite company in the world ATVI.  The same people like Jim Cramer who again (AGAIN!) put a big thumbs down last week when a caller asked about it on the lightning round.  Similar thumbs down he put on LVS and all these other stocks, these other stocks like C - which he now is giving a thumbs up.  I guess when it was at $1 it was total trash but since it went up a few dollars, it is suddenly a must buY!

If you want to stay behind the line and watch what you could of owned go ahead.  But here is my advice.  Who would know more about what a company's future will bring more than the company CEO?  With that said let's compare my 2 friends that have made me nice amounts of money in short time periods.

BAC: Ken Lewis loaded up on BAC in February for millions of $ when everyone was counting BAC out.  It dropped to under $3 and he took the heat.  Now look where BAC is.

C: Eugene McQuade just purchased 1,000,000 shares for $3.4 million on August 5th. 

Now you can either think C is full of BS and this is a strategy to save face (can't say it hasn't happened before in history), or you can see that they see something no one else sees and that C is going up.

Anyways, I'm a believer just as I was in BAC.  The real question is ARE YOU?



7 Comments – Post Your Own

#1) On August 10, 2009 at 3:53 PM, davejh23 (< 20) wrote:

I would sell BAC now.  You've made a nice profit, but:

"Nearly all the bank's earnings of $2.42 billion after preferred dividends came from Asia, thanks to a $3.5 billion after-tax gain from Bank of America's sale of part of its sake in China Construction Bank Corp. The bank's second-quarter profit totaled $3.22 billion before preferred dividends."

It is very likely that they will post losses, or minimal earnings, for the next several quarters.

"Bank of America CEO Ken Lewis said "profitability in the second half of the year will be much tougher than the first half,"

$45 billion in Treasury loans and they're not making any money except for one-time asset sales?  Based on current stock price and next year's outlook, I would say that forward P/E is easily 300+ and their measly dividend will be cut soon. 

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#2) On August 10, 2009 at 3:57 PM, Teacherman1 (< 20) wrote:

I went long on BAC when Lewis did in Feb, but didn't hit the exact low. I got in at about $4.50. I went long on C in early July at $2.99. I honestly did not expect it to go up this soon, but felt confident that in the longer run, it was a steal at that price. As a percentage of my stock picks, I am almost one third into banks, but not as a percentage of my actual cash position, since most of them were bought a very low prices. In the longer term, I believe they will pay off very well. All of my picks are backed by real money, so I study long and hard before I go in.

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#3) On August 10, 2009 at 3:59 PM, mikecart1 (75.12) wrote:

I'm thinking about getting FNM now.  Yeah it sounds crazy and is against everything on this site, but its about stock prices, not companies lol.

With all the morons investing, I see FNM going higher - a lot higher.

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#4) On August 10, 2009 at 4:08 PM, SnapDave (50.08) wrote:

OK you talked me into it - $5 Mar 10 calls.  Well, maybe you just reminded me, your logic isn't exactly profound.  What the heck, it's only USG monopoly money anyway. 

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#5) On August 10, 2009 at 4:20 PM, mikecart1 (75.12) wrote:

#4, yeah I try to keep investing basic for everyone to understand.  I'm not a fan of financial's, %'s, and other stuff although I am getting my MBA degree in 1 year to add to my engineering degree.  I think investing can be better to understand broader issues and patterns.

Like this one, usually when a CEO buys, they are investing in the company and predicting it will go up.  Again "usually."

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#6) On August 10, 2009 at 6:59 PM, rd80 (96.64) wrote:

I wouldn't take a long or short position in C right now. 

There's still a lot of room to go up if the perceived risk of needing more gov't assitance continues to decrease.

The big dilution from the preferred-to-common conversion is behind them.  No longer paying the dividends on the preferred helps cash flow.

Negatives include:
Their "profits" the last two quarters have depended on accounting and asset sales.  That's with Fed rates near zero and a steep yield curve.  The accounting change that drove profits first quarter (marking their own debt down to market) will necessarily reverse as survival becomes more certain.  You have to wonder what it will take for them to actually turn a profit.

When the gov't starts to unload their (our) stake, there will be an awful lot of stock flooding the market.  There's also dilution potential from the warrants the gov't still holds.

Until the gov't gets out of C, they remain the largest shareholder.  It's very likely the gov't goals and priorities won't always align with the interests of the other shareholders.

One last thing to consider, you wrote "I know them and don't see how such big companies will stay down for long."  The same thing could have been said about GM, AIG, and many others not too long ago.

Shorter answer - No, I'm not a believer in C.

Good luck to you, whatever you decide.

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#7) On August 10, 2009 at 7:28 PM, mikecart1 (75.12) wrote:

#6, agree but I also see the potential and don't want to miss another golden opportunity for a huge raise.  I also own FAZ so I got profits coming from there if C goes down hard.  I think there are more positives than negatives and you gotta take a risk sometime. :D

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