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Friday, November 30, 2007

Bank of America (BAC)

Ok, the first thought is probably that I have to be insane for bringing up a financial right now, of all times, but follow me on this one.

I'm going to start some introductory buying with BAC in December, on the rally seasonal date (December 4th). Now I've had this listed in my portfolio for a while, but haven't nibbled on it again and my stock purchases are a bit of a 'process'. When I buy a stock, it's either under "Introductory Buy", "Accumulate", "Pair off", or "Distribute (Which is rare)". To make a long story longer, I'm buying for the first time in a long time, so I'm beginning at step one; "Introductory Buy". This means just nibbles, or under 1% of my account.

Ok. Why?

1) I'm a firm believer in a modified version of Dollar Based Investing / Accumulation. The financials are getting hit hard right now. Really hard. So it's a great time to look for great deals and values on stocks. But since I do not believe that the crisis is fully over, I'm not going to just jump in with both feet. Thus, the 'nibbles' from my account. It's sort of like real estate speculation. You start buying when you believe the cycle is coming to an end. Not exactly at the end, since bottom and top picking is exceedingly difficult. I then wait for the market to tell me when to put it into 'accumulation' status.

2) Bank of America has a great history on the dividend route. They've been paying regular, steady dividends since . . . oh, I don't know . . . 1903!! They've been rock steady through some of the worst times this country has seen; thus they qualify under the "established corporation" route. Their dividend growth rate is 13.44 %, which is way above inflation and far enough ahead of taxes.

3) Their P/E right now is 10. That's right. 10. Their debt situation right now isn't hot, but they've been fueling growth with that debt. Their EPS is 4.66 and their PEG is 1.56. I fully expect to see lower prices with BAC, but I wanted to jump in with a little more while prices are where they are. I like the price, and volatility has been through the roof lately in this stock market, so no telling where we're going in the future, and I'm not smart (or dumb) enough to try to predict where we are going.

4) At this time of year, my DRIP is turned on, so any dividends we do receive will be reinvested. If that's on falling prices? Great. If it's on rising prices? Even better, since the market would then be telling me to put the stock into an "accumulation" status.

5) BAC is held 63% by institutions. This stock really shouldn't be going away any time soon. :)

P.S. - This purchase is not in the $500 Challenge Accounts that I run - just my normal portfolio.

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