Bank of America - BAC

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
DonutEater
Posts: 11
Joined: Fri Aug 04, 2017 12:09 pm

Bank of America - BAC

Post by DonutEater » Wed Oct 04, 2017 10:39 pm

I am about to make a considerable investment in Bank of of America. Can anyone talk me out of it?😬 I think there may be a small dip with the up coming earning announcement with an increase to following within weeks after. Anyone have any thoughts?

User avatar
nedsaid
Posts: 8851
Joined: Fri Nov 23, 2012 12:33 pm

Re: Bank of America - BAC

Post by nedsaid » Wed Oct 04, 2017 10:54 pm

I can't make a recommendation here. I don't know what you mean by considerable, how much of your net worth will be tied up in one stock? If you wanted to make a killing in B of A stock, the time to have jumped in was after the Feds and Warren Buffett pumped a lot of money in the company during the 2008-2009 financial crisis. Wouldn't call it a bailout, B of A took over both Countrywide Mortgage and Merrill Lynch. Buffett has converted his convertible stock to common stock and plans to keep holding the Bank of America common stock for a long time. The easy money has already been made in this thing.

Individual stocks are tricky, I do individual stocks as a smaller portion of my investments but I have 22 holdings spread over different industries. These are in total probably less than 15% of my net worth. It is not a good idea to make a bet of a big portion of your net worth into one stock. This forum is mostly about low cost index fund investing though there are forum members like me with individual stocks.

Don't follow the stock, but I will say that I have liked banks and insurance companies over the years as individual stock investments. Financial companies are risky and can blow up on you, I had this happen with AIG. I owned Fannie Mae too at one time and fortunately sold it at a big profit before it blew up. I took Buffett's cue when he sold his large stake in Freddie Mac, which is a very similar company. So pretty much I am saying let the buyer beware.
Last edited by nedsaid on Wed Oct 04, 2017 10:59 pm, edited 1 time in total.
A fool and his money are good for business.

drk
Posts: 103
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: Bank of America - BAC

Post by drk » Wed Oct 04, 2017 10:57 pm

Never play earnings, especially if you're inclined to come to the Bogleheads forum to ask about your play.

User avatar
FrugalInvestor
Posts: 4504
Joined: Fri Nov 07, 2008 12:20 am

Re: Bank of America - BAC

Post by FrugalInvestor » Wed Oct 04, 2017 11:17 pm

I'm sure I own some of that stock, but I've never purchased any.

My advice:
1. Own the market through a good total market index fund
2. Put your feet up
3. Relax
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

123
Posts: 2598
Joined: Fri Oct 12, 2012 3:55 pm

Re: Bank of America - BAC

Post by 123 » Wed Oct 04, 2017 11:30 pm

If you're going to buy an individual stock you should wait until it reaches it's absolute lowest price where it can't go any lower.
The closest helping hand is at the end of your own arm.

petscii
Posts: 3
Joined: Mon Sep 01, 2014 11:26 am

Re: Bank of America - BAC

Post by petscii » Thu Oct 05, 2017 1:58 am

Why didn't you buy some when the dividend was .01?

jcavana1
Posts: 40
Joined: Mon Aug 22, 2016 5:21 pm

Re: Bank of America - BAC

Post by jcavana1 » Thu Oct 05, 2017 5:28 am

I won't argue that you should buy BAC, but I did buy a large chunk of the company 2 or 3 weeks ago. It now, temporarily comprises >25% of my portfolio.

I bought on a big dip that was just lucky, about 5% over 2 days, as I was probably going to invest in it without the dip, but this hastened my decision (I'm up about 12% in the last 2 or 3 weeks ;).
Last edited by jcavana1 on Thu Oct 05, 2017 11:25 am, edited 1 time in total.

deltaneutral83
Posts: 438
Joined: Tue Mar 07, 2017 4:25 pm

Re: Bank of America - BAC

Post by deltaneutral83 » Thu Oct 05, 2017 8:01 am

Had a buddy who worked there during the crisis. I asked him how it was going in an email, he responded back with a picture of a pack of cigarettes. I said "What's this supposed to mean" and he said "one share of my company costs less than a pack of cigarettes." So I'm guessing that was right about First Q 2009.

Buffet made the majority of what he'll make of BAC way back then.

User avatar
Pajamas
Posts: 2838
Joined: Sun Jun 03, 2012 6:32 pm

Re: Bank of America - BAC

Post by Pajamas » Thu Oct 05, 2017 9:57 am

Okay, let's just pretend this is not Bogleheads since you are talking about market timing.

The best time to buy BAC was about five or six years ago and there was another good opportunity last year. It has really run up in price lately, into new post-financial crisis highs. I doubt a big bank is going to grow at a rate much higher than the market. If you are going to buy, at least wait for a pull-back. Doesn't seem like the best choice for a momentum or earnings play. It is usually on the list of stocks with the largest trading volume and doesn't make significant short-term moves.

User avatar
BolderBoy
Posts: 3462
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Bank of America - BAC

Post by BolderBoy » Thu Oct 05, 2017 11:02 am

DonutEater wrote:
Wed Oct 04, 2017 10:39 pm
I am about to make a considerable investment in Bank of of America. Can anyone talk me out of it?😬 I think there may be a small dip with the up coming earning announcement with an increase to following within weeks after. Anyone have any thoughts?
My first thought is that you should be diversifying rather than placing your whole bet on one stock. If someone uncovers a WellsFargo-type scandal at BoA, your investment will tank.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

DonutEater
Posts: 11
Joined: Fri Aug 04, 2017 12:09 pm

Re: Bank of America - BAC

Post by DonutEater » Thu Oct 05, 2017 12:29 pm

I guess I should have been more clear when I said considerable. I want to buy a 1000 shares. This would represent around 9% of my current portfolio. I know this is outside boglehead mindset. My plan would be to hold it a minimum of 3-5 years.

User avatar
whodidntante
Posts: 2327
Joined: Thu Jan 21, 2016 11:11 pm

Re: Bank of America - BAC

Post by whodidntante » Thu Oct 05, 2017 12:40 pm

Over the past I've netted a nice bonus from big BOA. Since you are now a major shareholder, I just wanted to say thanks. :happy :sharebeer
Last edited by whodidntante on Thu Oct 05, 2017 12:47 pm, edited 1 time in total.

User avatar
Pajamas
Posts: 2838
Joined: Sun Jun 03, 2012 6:32 pm

Re: Bank of America - BAC

Post by Pajamas » Thu Oct 05, 2017 12:44 pm

Why do you want to buy a stock and have it represent 9% of your investment portfolio?

Honestly, if you are asking on Bogleheads to have someone talk you out of it, the most obvious response would be that it's not in accord with Bogleheads philosophy and there is plenty of information about that on the site. At best you will get someone to say it's fine to play around with some fun money and put it in whatever you want for speculation and entertainment.

Why do you want to buy a bank stock, particularly BAC?

If you want someone to talk you out of a sector or the particular stock, this is just not the best place to ask, even though I answered that above.

It's not clear to me whether you really want someone to talk you out of it or if you are looking for confirmation for your plan. Either way, if you have to ask about it on an internet forum in order to decide, don't do it. At least wait until you can make up your own mind. That would go for anything else such as whether or not to have surgery or to start eating beets every day.

Grt2bOutdoors
Posts: 17259
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Bank of America - BAC

Post by Grt2bOutdoors » Thu Oct 05, 2017 12:51 pm

DonutEater wrote:
Wed Oct 04, 2017 10:39 pm
I am about to make a considerable investment in Bank of of America. Can anyone talk me out of it?😬 I think there may be a small dip with the up coming earning announcement with an increase to following within weeks after. Anyone have any thoughts?
With market expectations of higher interest rates and perceived improvement in the general economy, do you really want to play the earnings announcement game? I am long the equity, bought it when nobody wanted it but not at the absolute lows (unless you include index purchases) - if you are going to buy it do so for the right reasons, the earnings announcement is going to be a blip (up or down) that in the long run will be just that - a blip. Do you see WB making investments based on short-termism? Stop watching FAST MONEY......you know why its called FAST MONEY right? Because they take money from folks who get greedy......FAST!! Buy the financial sector index if you want to make a sector play. But don't get greedy as that seems to never end well, except for those on the other side of the trade.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
Posts: 17259
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Bank of America - BAC

Post by Grt2bOutdoors » Thu Oct 05, 2017 12:58 pm

DonutEater wrote:
Thu Oct 05, 2017 12:29 pm
I guess I should have been more clear when I said considerable. I want to buy a 1000 shares. This would represent around 9% of my current portfolio. I know this is outside boglehead mindset. My plan would be to hold it a minimum of 3-5 years.
A year ago, you could have picked up 1000 shares for 50% off the steak price. Now you want to pay 50% more or rather, say 45% more because why?
Your first post doesn't jive with your later posts, except that you are willing to pony up 9% today. My question to you is two fold: 1) What will you do if value appreciates to represent 20% of portfolio? and 2) What will you do if value plunges in half to $13 a share? Buy more, hold or sell? The ride can be volatile (first hand, i rode it! down, up and down, now up again!).
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Ragnoth
Posts: 84
Joined: Sat Sep 17, 2016 8:10 am

Re: Bank of America - BAC

Post by Ragnoth » Thu Oct 05, 2017 1:02 pm

You are asking about market timing on a forum devoted to index investing. But if we really want to play the game... you still have no thesis for buying in right now.

Based on fundamentals, financial companies in recent years have traded around 10-15 price/earnings and about 1-1.5 price/book.

When BOA hit a low last year, or during the financial crisis, there were cheap valuations around (e.g., a price to book of .7-.8). People were discounting a lot of their holdings because it was suspected to be bad mortgage debt and/or hiding various liabilities due to the lawsuits flying around after the crisis.

Buying on those dips turned out to be very profitable for people who were confident that the damage from the crisis had already been contained.

At this point, BOA is at best "fairly" valued, and I don't think there is a clear reason why BOA is going to crush the competition over the next 3-5 years (as opposed to any other financial company). Maybe you have some reason behind your decision... but from here it looks the classic mistake of watching the stock run up and convincing yourself to buy at the high because you're excited it might go higher!

Grt2bOutdoors
Posts: 17259
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Bank of America - BAC

Post by Grt2bOutdoors » Thu Oct 05, 2017 1:52 pm

Ragnoth wrote:
Thu Oct 05, 2017 1:02 pm
You are asking about market timing on a forum devoted to index investing. But if we really want to play the game... you still have no thesis for buying in right now.

Based on fundamentals, financial companies in recent years have traded around 10-15 price/earnings and about 1-1.5 price/book.

When BOA hit a low last year, or during the financial crisis, there were cheap valuations around (e.g., a price to book of .7-.8). People were discounting a lot of their holdings because it was suspected to be bad mortgage debt and/or hiding various liabilities due to the lawsuits flying around after the crisis.

Buying on those dips turned out to be very profitable for people who were confident that the damage from the crisis had already been contained.

At this point, BOA is at best "fairly" valued, and I don't think there is a clear reason why BOA is going to crush the competition over the next 3-5 years (as opposed to any other financial company). Maybe you have some reason behind your decision... but from here it looks the classic mistake of watching the stock run up and convincing yourself to buy at the high because you're excited it might go higher!
A more appropriate valuation of bank stocks is tangible net worth (book value less goodwill/intangibles) - B.O.A. was trading below the liquidation value of the common equity (on more than 1 occasion) during the last 18 months. Other than that, agree with what you wrote above.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Post Reply