How do we determine whether Bank of America Corp (NYSE:BAC) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
With that in mind, it appears that investors who are in the know are becoming hopeful about Bank of America’s prospects. The number of bullish hedge fund positions rose by five during the fourth quarter, with it being in 113 hedge funds’ portfolios at the end of December. Likewise, the value of those investors’ collective holdings rose by about 5% to $6.8 billion. The hedge fund ownership ranked Bank of America as the seventh-most popular stock overall, as well as the most popular financial stock, as it overtook Citigroup Inc (NYSE:C).
Why do investors love Bank of America? For one, it’s now trading at a very attractive P/E of 10.50, and a price-to-book ratio of 0.60. This was referenced by billionaire Ken Fisher of Fisher Asset Management in a recent article posted on Interactive Investor. Mr. Fisher expects big things from Bank of America in 2016, having this to say about the company in which he owned 43.09 million shares of on December 31
“The UK often provides sneak previews of US financial phenomena (and vice versa). Both operate more similarly than either fathoms. To me, the ending of Britain’s “stronger bank balance sheets at any cost” policy foretells a similar loosening of American loan-growth constraints – and increased earnings. Hence Bank of America (BAC) should positively surprise, ending its sideways wiggles. It’s our overall best-postured big retail bank, yet sells at 11 times my 2016 estimate.”
It should be noted that despite that glowing endorsement and Mr. Fisher’s large BAC holding, it’s not actually his top financial stock pick. Mr. Fisher had more valuable positions in both JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC). It should also be added that the stock has fallen quite heavily since that article was posted on January 7, by about 16%, making those valuations even more attractive.
After slashing its holding in Bank of America by 64% during the third quarter, Bruce Berkowitz’s Fairholme was back to buying Bank of America in the fourth quarter, raising its stake by 20% to 16.81 million shares. Mr. Berkowitz had this to say about BAC in a letter to investors on July 17, 2015: