Saturday, April 23, 2011

Bank of America : A cheap business? Getting Cheaper?

There are three bad developments for BAC.
1)The resignation of CFO Charles Noski. Yes, the CFO resigned for family illness reasons, but nonetheless this raises concerns at the bank. Prominent short seller Jim Chanos noted that short sellers "love to see" key executives leave a company.

2)Bank of America may be understating its exposure to repurchase requests on bad home loans. Bank of America claims that the losses will not exceed $10 billion, but many analysts say the number could be $30 billion as Bank of America swallowed thousands of dubious Countrywide mortgages.

3)The foreclosure issue continues to drag on. Bank of America assumed the troubled mortgage portfolio of Countrywide Financial which is a continued source of weakness for the company. Mark Hanson, one of the most reputable mortgage analysts in the country, noted that it might take eight more years for the shadow inventory to clear!

Is this a best buy? I would like to bet on this counter (Be greedy when bad news :) but, not 100% of porfolio in this counter. I prefer 8-10% of my total capital in this counter at this moment unless there's something attract me to buy/accumulate more shares.