Anyone who’s reading this probably knows that Bank of America Corp (NYSE:BAC)‘s share price doubled in 2012, moving from the low point of $5.80 on Jan. 3 to its year high of $11.61 on Dec. 31. The stock is currently trading for $12.27, and hasn’t moved below $11 all year.
But for investors who bought in the $5 range and saw it through to where it is now, $10 is a kind of tipping point: a number more important psychologically than anything else, but one no investor still ever wants to see B of A move under.
Here’s why Bank of America Corp (NYSE:BAC) stock will likely stay above $10 in the long-term, but why anything much more than that is a long shot.
What a difference a year makes
At the start of 2012, none of the Big Four banks was doing particularly well in terms of share price. Citigroup Inc. (NYSE:C) was trading at $28.33 and Wells Fargo & Co (NYSE:WFC) at $28.43, while JPMorgan Chase & Co. (NYSE:JPM) began the year at $34.98.
By year’s end, Citi was up to $39.56, Wells was up to $34.18, and JPMorgan was at $43.97 — for respective gains of 39.64%, 20.23%, and 25.70%. For 2012, financials was the best-performing sector of the S&P 500, and with numbers like these, it’s not hard to understand why.
Image: Bank of America Corp (NYSE:BAC)
But at the beginning of 2012, all of these banks were still reeling particularly hard from the financial crisis. It can be argued they still are, but a year and half has made all the difference. 2012 was a real turning point for investors: that it was OK to start moving money back into the big banks, even if all the issues in the system that had caused the crash had yet to be addressed.
Foolish bottom line
But for right now, I think the market has done everything for Bank of America Corp (NYSE:BAC) that it’s going to.
B of A is up only 2.91% year to date, and it’s almost May. That hardly puts the superbank on track for stellar gains for 2013. But JPMorgan Chase & Co. (NYSE:JPM) is already up 9.54% for the year, Wells Fargo & Co (NYSE:WFC) is up 8.07%, and Citi is up a big 13.5%, putting all of B of A’s peers on track for a big year.
I think investors saw Bank of America Corp (NYSE:BAC) emerge from all-out crisis mode at the beginning of 2012 and began to pour their money into it, and rightly so. Though the bank still faces enormous challenges, it was no longer in danger of failing then and isn’t today.
As such, I think the superbank’s stock is a safe bet to stay above $10 per share, primarily because investors weathered enough challenges in 2012 and even 2013 — like a $10 billion January settlement with Fannie Mae over bad mortgages — that if they were going to run because of litigation fears and drive the price back down under $10, they already would have.
But the bank is still so unfocused and so ungainly, and the leadership just doesn’t seem to be there, that I don’t think it’s going to go much farther than where it is right now.