Bank of America's (NYSE:BAC) recent woes due to uncertainty surrounding home
foreclosures and mortgage repurchases have led to increasing weakness in
the shares of BAC. That inspired a note from Morgan Stanley (NYSE:MS) this
morning suggesting that shareholders should continue to stay long the stock
as fundamentals do matter and that the fears surrounding the reps and
warranties costs have become temporally overwhelming.
The firm believes that BAC "has the earnings power to meet these challenges
over time and raise the dividend next year." Morgan Stanley said that while
the reps and warranties issue will remain, they will eventually stabilize
and fade and investors can then focus on falling credit losses, higher EPS
and book value.
The firm also believes that BAC shares are cheap at 0.6x PB (price/book) and
0.9x PTB (tangible book). Bank of America is Morgan Stanley's top pick
among the large cap banks.
SmarTrend alerted subscribers to take profits in Bank of America on October
15, 2010 at $12.21, since then the stock fell 5%. We are now watching for
any positive developments that could result in a new uptrend signal.
Bank of America is currently below its 50-day moving average (MA) of $13.19
and below its 200-day MA of $15.38. In the last five trading sessions, the
50-day MA has fallen 1.08% while the 200-day MA has slid 0.39%.
