Tuesday, June 17, 2008

Bank of America CountryWide Watch - Update

The stock market was not kind to banks today on fears of additional write-offs and possible dividends cuts. BofA in particular was noted in this regard as it set a new 5 year low below $30. One year ago the stock traded at over $50 with the decline amounting to about $100bb in shareholder value. Their common stock now yields 8.75% which means the market is betting on a cut in their dividend. The CountryWide acquisition is largely viewed by analysts as ill-conceived and adding more risk to an already risk-laden business. Yet the bank seems determined to go forward.

I like to contrast BofA to U S Bank. U S has chosen a very different path. It has carefully selected its business lines and manages risk with even greater care. Its acquisitions are also carefully strategic in nature. While BofA's stock this past year dropped over $20 to below $30, US Bank has seen its stock slip a mere $3 to $31. Wonder why Warren Buffet owns US Bank and not BofA?

1 comment:

Anonymous said...

Dear Mr.Martens,

thank you for your interesting article.

I enjoy reading it.

what is your opnion on B of A
since they merge countrywide,
Loss will be coming up?
like citi?

I appriate your opion

thank you

P.S
Mr.Warren Buffet owns both US bank and B of A share. He bught B OF A stock in 2007
He also, bought more shure of welles forgo( this is my guess)