Bank of America is updated and rated Speculative (higher) Buy at $10.64. This stock is up 32% since we officially added it to this site last March 11 rated Speculative Strong Buy at $8.05. It is also up 48% since we updated it (and noted that I had added to my position in it) at the same rating at a price of $7.17 on July 27. I had first mentioned in the daily notes back in July 26 and August 2, 2011 that I was buying Bank of America. That was at about $9.50. As I have said before, I bought too much on that first buy. That prevented me from taking full advantage of the big price drop through to the end of 2011. Still this investment is now “in the black” and I ultimately did almost double my position in it with both buys below that initial $9.50. This investment is now well “in the black” and hopefully with more up-side to come. Recently I was inclined to trim my position in this stock. But right now, after this update, I am more inclined to add modestly to it. However, I am already heavily exposed to U.S. bank shares and I should perhaps avoid getting too greedy.
Many of you will have read the words of various doomers over the past couple of years that claimed “all the big U.S. banks are actually bankrupt on a mark to market basis” and “the U.S. is bankrupt as well”. And paper currency is doomed. And the “U.S. house prices have not bottomed yet” (beware the shadow inventory of foreclosed houses etc). Most of the doomer comments were from people who had no understanding of these matters but yes there are some highly educated people who agree with the doomers. Maybe the doomers will ultimately be proven correct. But I doubt it. And maybe the world will end this month as the Myan Calendar runs out. Whatever, the end of days has been continuously predicted since the beginning of days. It’s not very logical to invest based on doomsday scenarios.
Banks will likely continue to be volatile investments. Those who can’t handle investing in shares that might well drop significantly in price should stay clear of stocks or educate themselves on the risk and reward tradeoffs involved. Personally, I have accepted and lived with significant volatility over the years and it has been financially rewarding. In fact price drops have often been to my advantage as I added to my positions at lower prices. Of course, that only works out if the prices eventually recover and grow, which, more often than not, but not always, they have done.