An Insider Bought $230,000 Worth of Bank of America

Bank of America Corp (NYSE:BAC) Board member David Yost directly purchased 20,000 shares of the company’s stock on January 24^th at an average price of $11.53, according to a filing with the SEC. This nearly doubled Yost’s holdings of the stock; he had last bought shares in early November at prices of about $9.50. See a history of Yost’s insider purchases at Bank of America and at other companies. We track insider purchases because studies show that they tend to be bullish signals (read more about studies on insider trading). We think that this is because company insiders have to be more confident than usual that the stock price will rise in order to overcome the benefits of diversification. Yost is buying the stock on the strength of a rally- the stock is up 58% in the last year.

The bank has already reported its results for the fourth quarter of 2012, with performance not being particularly good. Revenue was down 25% from the same period in 2011, and earnings fell 63%. However, Bank of America Corp does get attention in the financial community for some attractive valuation metrics. The stock trades at a significant discount to book value- the P/B ratio is only 0.6- and while recent financials have not been impressive Wall Street analysts have the stock trading at 12 times this year’s earnings and a forward P/E of 9. The five-year PEG ratio is 0.6 as the sell-side actually considers Bank of America undervalued on an earnings basis.

Bank of America Corp was one of the most popular stocks among hedge funds in the third quarter of 2012 (see the full top ten list). Billionaire John Paulson sold some of his shares during the quarter but still reported a position of 28 million shares at the end of September (check out Paulson’s stock picks). Platinum Asset Management, managed by billionaire Kerr Neilson, owned a little over 35 million shares and this made Bank of America one of that fund’s largest 13F holdings (find more of Neilson’s favorite stocks). Bruce Berkowitz’s Fairholme had over $900 million invested in the stock.

However, other large banks look like better investments: