BAC Price to Book Value data by YCharts
I've been reticent to reinvest in the company until now, but Bank of America has finally moved beyond the risk and uncertainty that has been hanging over the company, settling claims tied to Countrywide Mortgage with numerous state and federal agencies last year. At the same time, the bank has reduced its physical footprint, continues to take steps to improve its cost structure, and is set to benefit from rising interest rates.
The risks have come down, profitability is set to grow sharply, but the market is looking the other way. The recent downturn in banking stocks made an already-cheap Bank of America into a steal. As of this writing, Bank of America's stock is down more than 20% from late-2015 prices, and trades at a significant discount to its banking peers in valuation metrics including price to book value, and price to earnings.
Yes, BofA shares may remain cheaper than its peers for years to come, but there's still huge upside if that remains the case. Now's a great time to buy Bank of America.
Matt Frankel: Like Jason, I too have loaded up on Bank of America in my portfolio, and another bank that strikes me as particularly attractive right now is Goldman Sachs .
Like the rest of the banking sector, Goldman is facing headwinds that have caused its price to drop in recent months. The IPO market is a little weak, persistently low oil and gas prices could cause a wave of loan defaults, and overall global economic uncertainty has bank investors nervous.
However, I think Goldman's current share price compensates investors for these risks and more. In fact, Goldman is trading for a 5% discount to the value of its tangible assets -- a valuation level last seen in 2012 when the financial crisis was fresh in investors' minds.
In addition, Goldman Sachs' has diverse business lines that can compensate for each other during tough times. For example, the low oil prices could cause loan defaults, but they could also lead to a boost in M&A activity as well.
Finally, I love that Goldman prioritizes buybacks over dividends, which could add tremendous value for shareholders while the price is depressed. In a nutshell, Goldman Sachs is made up of the smartest guys on Wall Street, who will find a way to make money no matter what the economy is doing.
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The article 3 Bank Stocks to Buy in April originally appeared on Fool.com.
Matthew Frankel owns shares of Bank of America, Berkshire Hathaway, and Goldman Sachs. The Motley Fool owns shares of and recommends Berkshire Hathaway and Wells Fargo. The Motley Fool has the following options: short May 2016 $52 puts on Wells Fargo. The Motley Fool recommends Bank of America. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
