Bank of America Corp (BAC) is expected to grow earnings per share by more than $2 in the next few years as the money center bank continues recovering from blows suffered under the economic crisis, the stock rising along with several of its peers in financials, says Neil T. Eigen, Senior Portfolio Manager and Director at Columbia Management.
“We continue to like Bank of America. The stock is $14, and to me, it’s a name that probably doubles over the next couple of years as their returns tend to continue to improve, their legal problems tend to diminish, their reserves tend to be enough to handle any upcoming problems and they start to diminish their reserves. I look for a Bank of America probably in three years to show an earnings number in excess of $2, maybe we even start talking about something close to $3 a share,” Eigen said.
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Eigen says banks are one of the best-performing groups, and he expects them to continue on their upward trajectory. He chooses stocks that may be out-of-favor by the Street, but he has taken handsome profits in the process.
“The stocks have done extremely well, they were the best-performing group last year. We had a 30%-plus weighting in the group. It really helped us, and I think the banks continue to do well. As the economy comes back, as lending picks up, as interest rates move up a little, their net interest margins expand. So they’re really in a sweet spot. But again, you have to anticipate change. If you wait for things to get better, the stocks have already moved and you’re too late,” Eigen said.
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