3. Bank of America Corporation (NYSE:BAC)
Number of Hedge Fund Holders: 99
Share Price (as of June 9): $34.51
Bank of America Corporation (NYSE:BAC) is a bank holding company based in North Carolina which offers financial services to clients across the United States. With a market cap of $278 billion, it ranks as one of the best blue chip stocks to buy in the banking sector. The company pays a dividend yield of 2.43% as of June 9, and has increased its payout to shareholders for 8 years in a row.
On May 3, Oppenheimer analyst Chris Kotowski maintained an ‘Outperform’ rating on Bank of America Corporation (NYSE:BAC) shares with a revised price target of $50, down from $52. He notes that banks tend to do well when interest rates rise, and that they should remain “solidly profitable with their dividends intact” in the current market situation. The analyst urged investors to benefit from the recent share price weakness and buy Bank of America Corporation (NYSE:BAC) stock.
For the quarter ending March, Bank of America Corporation (NYSE:BAC) reported earnings per share of $0.80, beating estimates by $0.06. The company’s revenue of $23.23 billion for the quarter was also above consensus estimates by $135.8 million.
Investors were seen buying up on Bank of America Corporation (NYSE:BAC) stock. At the end of the first quarter, 99 hedge funds were bullish on the company shares, up from 84 in the quarter before. Warren Buffett’s Berkshire Hathaway was the leading shareholder of Bank of America Corporation (NYSE:BAC) in the first quarter, with a gigantic $41.6 billion stake.
Miller Value Partners, an investment firm, mentioned Bank of America Corporation (NYSE:BAC) in its Q1 2022 investor letter. Here’s what the fund said:
“There are many times when volatility and beta give false signals. Banks outperformed in the post-tech bubble bear market of the early 2000s. At the market peak prior to the financial crisis (when risk was the highest in those names!), Bank of America (NYSE:BAC) had a 0.9x beta (based on the trailing 5 years) suggesting its “risk” was below the market’s. Wrong! It massively underperformed in the financial crisis. Realized beta over the 5 years from the pre-crisis’ 2006 peak measured 2.3x.
A much better indicator of actual risk, both before and after the financial crisis, was the quality of the balance sheet and risk-taking appetite. Beta is backwards looking and non-stationary. Relying on it underestimated risk going into the financial crisis and overestimated coming out of it (its beta has continued to fall over the past decade).
We care greatly about risk. We spend a significant amount of time thinking about the risks to our investments. We measure risk as permanent impairment of capital, which means the prices and values don’t bounce back. Business fundamentals determine risk.”
