My 96% Italian ethnicity (thank you, Ancestry.com) never, ever factors into investment stories. But there’s first time for everything, ya know whad I’m sayin’? And with Bank of America (NYSE:BAC), I shall remind you, gentle reader, that a) “America” itself is named for Italian merchant Amerigo Vespucci; and b) this financial institution was founded in 1904 as San Francisco’s Bank of Italy by Amadeo P. Giannini. What this has to do with Bank of America stock I’m not 100% sure yet but hang in there. I’ll figure it out. … OK, got it.
I guess could cite the irrefutable fact that Italians gave Planet Earth the best opera, best music, best food, best fine art, best intractable bureaucratic red tape and very best braggadocio. Italians also founded the oldest bank still operating, the Banca Monte dei Paschi di Siena, which dates to 1472. But to the point, can today’s Bank of America live up to the prosperity realized by Italian banking pioneers? This much we know: You don’t have to claim pizza sauce in your blood to enjoy the dolce vita of handsome returns.
Besides, it would be just plain wrong to take anything from current Chairman and CEO Brian T. Moynahan because he’s of Irish descent. In fact, BAC shareholders should know that Chief Executive Magazine named Moynahan their 2020 Chief Executive of the Year in July, an honor voted on by his C-suite peers.
If Moynahan embodies just the kind of excellence that would’ve made Giannini proud, the logical question to follow is this: Does the performance of BAC stock reflect it? Andiamo! Let’s see for ourselves.
BAC Stock Getting Unstuck
While many compare the economic fallout from the Great Recession to the 2020 recession wrought by the novel coronavirus, banks have experienced both events as antipodes. Back in 2009, financial institutions instigated many of the problems through toxic mortgages and despicable business practices. Punished by investors, Citigroup (NYSE:C) traded for as low as 97 cents on Mar 5, 2009.
The next day, BAC stock closed at the near-flatline price of $3.14 cents a share. Assuming you have nerves of steel — military-grade steel is more like it — 1,000 shares purchased then for just above $3,100 would be worth more than $25,000 today. As it stands, BAC has certainly taken a beating in 2020, but so has pretty much everything. It’s off 29% for the year, but has jumped 40% since bottoming out on March 2. (What is it with March and banking stocks?)
One thing’s for sure: Moynahan ain’t no John Stumpf, the disgraced former CEO of Wells Fargo (NYSE:WFC). He once boasted that when it came to customer accounts, “eight is great,” thus forcing his minions to open illegal accounts to reach that greedy goal. Moynahan by contrast has the steady hand to lead BAC into further recovery, though investors should not expect fireworks to accompany. Being the stalwarts they are, traditional banks almost always tilt towards steady-as-she-goes share price increases.
Modest Earnings In the Black
Earnings per share on BAC stock have stayed in the black over the last four quarters, each time hitting the mark where analyst forecasts are concerned. If that trend continues, expect earnings of 49 cents per share when Bank of America issues its third quarter report on Oct. 14.
That kind of performance explains why analyst firms look kindly on BAC stock. It’s currently overweight as 15 call it a buy, 11 a hold and none a sell. If it hits its average share price target of $28.96, shareholders will realize a 14% gain.
To all those hypnotized by the soaring prices of high-tech stocks such as Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), 14% might sound paltry. Hooey. Every portfolio should welcome a solid gainer, or at the very least a stock from an established company that economic headwinds will not shake. If Covid-19 isn’t such a hurricane, I don’t know what is. Thus far, BAC stock passes muster.
Bank of America a Place to Put Your Money
One negative that could possibly impact BAC stock, and its traditional banking brethren, lies in the existential threat from financial technology companies, know in the sector as “fintechs.” Their goal in many cases is to disintermediate banks, and if you ask anyone in Gen Z who uses Venmo, they might not even know or care how old-fashioned banks and ATMs work. Many have gotten used to going entirely cashless. In some cases, they have never set foot in a bank branch.
That said, Bank of America has won industry awards for its Erica chatbot, which acts as an interactive personal financial assistant. So its commitment to keeping up with fintechs, and in some cases partnering with them, has meat on the bones.
I don’t always get to write about stodgy stocks that hold enough ballast to stay docked in socioeconomic storms. Look at your portfolio, see how much of a conservative position you might need to take, and consider BAC stock as a way to fill that need. You’ll make money, I feel.
And as an appropriate way to celebrate, might I suggest some pasta al dente pomodoro, a glass of chianti and a soundtrack provided by Frank Sinatra and Louis Prima? You as an intelligent investor know how to make the money; I as an indulgent Italian know how to blow the money on celebrating.
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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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.