Year to date, Bank Of America (BAC) stock is up over 45% compared to the S&P at +about 8%. BAC stock has bounced back nicely after dropping precipitously at the end of last year.
I would call the 45% bounce a “dead cat” bounce because I expect the stock to fall right back to $5/share, where it bottomed last Thanksgiving, or lower.
After combing through BAC’s 300-page 2011 10-K report filed with the SEC last Thursday, I found the business is not as good as the company would have us believe, and my rating on the stock dropped from Dangerous to Very Dangerous. BAC is also a new member of my Most Dangerous Stocks list, updated Friday March 2. See my free stock screener for ratings on 3000+ stocks updated daily.
BAC’s reported earnings are misleading in 2011 because they are positive and rising while the economic earnings are negative and declining. The company reported net income of $84 million for 2011, a $3.7 billion increase over 2010’s net income of -$3.6 billion. Over $14 billion in one-time charges sank 2010’s earnings and set up the opportunity for favorable comparison for 2011’s earnings. And according to its reported results, at least, the company delivered an impressive improvement in earnings for 2011 versus 2010...
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(Read more from David Trainer on his blog, The Intelligent Investor.)