Bank of America (BAC) has fallen about 16% in the past month, significantly underperforming the broader market and the sector. This underperformance is curious given the bank’s leading position and the strength of its Merrill Lynch investment and wealth management arm. What I do know, though, is that the stock is grossly undervalued and grossly oversold.
Wall Street’s fear is that an economic slowdown will offset any gains the banks will see from higher interest rates. However, I tend to agree with Bank of America CEO Brian Moynihan, who expects a softer landing in 2023.
Let’s accept shares. I will recommend a call to sell against them soon to reduce our cost basis on the position.
Current Stock Price: $31.53
Net Debit: $7.87
Action: Accept shares
Cost Basis: $43.87
Potential Rate of Return: I am targeting breakeven for this position