Bank of America (NYSE: BAC ) is one of the most hated companies in America .
Aside from past robo-signings, proposed fees and general shenanigans amid the
financial crisis, the company continues to prove all of its critics right with
continued missteps and ugly headlines. Its earnings can't be trusted and its
CEO, Brian Moynihan, is completely out of touch . So it's no surprise that
despite briefly breaking below the $5 mark , nobody came out yesterday and
labeled Bank of America stock as a bargain. An intraday low of $4.92 and a close
of $4.99 marked the lowest levels for the stock since March 2009 the bear
market bottom that saw stocks rebound with a vengeance. The S&P was at 676 now
its at 1,234. But while the major indices have doubled, Bank of America is just
as ugly to investors now as it was during those dark days two-and-a-half years
ago. Very few stocks are at 2009 levels. Some of them deserve to be there
Eastman Kodak (NYSE: EK ), for instance, which appears to be doomed for
bankruptcy without extraordinary intervention. You simply can't lose money and
have debt that large and expect to stick around. However, Bank of America is not
like Kodak. Aside from a brutal second quarter in 2009 when it took some $20
billion in write-downs, it is nominally profitable. It trades for a paltry 0.25
price-to-book ratio while Wells Fargo (NYSE: WFC ) is at 1.0 and JP Morgan
Chase (NYSE: JPM ) is at 0.6! So, BAC shares could be a bargain at $5, right?
Right? Unfortunately, hardly anyone on Wall Street is buying that argument.
It's remarkable how few people came out of the woodwork yesterday and today
trumpeting Bank of America's bargain potential. In fact, the biggest talking
point I've noticed is about how Warren Buffett might be taking a bath on his
risky play in Bank of America. BofA gave Buffett warrants to buy a whopping 700
million shares of common stock at $7.14 when the Oracle of Omaha plowed $5
billion into preferred shares of BAC stock . Obviously those warrants don't
really matter when shares are almost 30% under that strike price. By some
estimates, Buffett has lost $1.5 billion on the deal since that August buy-in,
when shares were around $6. But don't weep for Warren his nice 6% dividend on
his shares will keep paying him, and BAC stock has moved up from under $5 today
and could keep rising. But the fact that Buffett could ride in on his white
horse with the "smart money," buying Bank of America at $6 only to see
shares hit $5 four months later … that's enough to make every investor think
twice. As result, Bank of America should be seen as an extremely short-term play
for only the most aggressive traders … akin to Sprint Nextel (NYSE: S ),
Sirius XM (NASDAQ: SIRI ) or other big-name stocks that are super cheap and
super volatile. As for the buy-and-hold crowd, sit this out for now. Bank of
America is the ultimate value trap. Plenty of folks think Bank of America is
getting what it deserves as some kind of karmic payback for its misdeeds. While
there might be some cosmic justice here, the reality is that the only true
recovery will see banks recover, too . Here's hoping Bank of America turns it
around not for shareholders, but because we simply can't afford to see
another financial behemoth go under. Jeff Reeves is the editor of
InvestorPlace.com. Write him at editor@investorplace.com , follow him on Twitter
via @JeffReevesIP and become a fan of InvestorPlace on Facebook . Jeff Reeves
holds a position in Alcoa, but no other publicly traded stocks.
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