New Trade for February 11th, 2022

The market struggled to find a direction in early trading after a red hot CPI sent stocks into a sharp reversal.  Yesterday, CPI data revealed that consumer prices had jumped 7.5% from last month, the steepest increase in four decades, inciting speculation about a more hawkish Fed.   

Wall Street strategists expect a bumpy road ahead for stocks as the Fed policy changes come to fruition.  The median year-end target for the S&P 500 stands at 4,940, representing a gain of only 6% from yesterday’s close.  

In today’s trade alert, we’ll discuss a stock likely to do well as the Federal Reserve tightens monetary policy throughout the year.    

Bank of America Corporation (BAC) provides banking and financial products and services for individual consumers, institutional investors, large corporations, and governments worldwide. It operates through the following segments: consumer banking; global wealth & investment management; global banking; and global market segments.

Thanks to its global investment banking and financial services portfolio, most are familiar with this financial titan.  In the U.S., BAC currently operates via 4,300 retail financial centers, 17,000 ATMs, and digitally serves 41 million active users. Furthermore, the company is also present in 34 other countries across the globe.

After more than doubling since its pandemic-era low, let’s take a look at the factors that could boost BAC going forward.  For one thing, the Fed has signaled multiple interest rate hikes in 2022, which should help BAC increase its interest income down the road. 

In the fourth quarter, Bank of America reported that net interest income (profits made on loans) grew to $11.5 billion.  Wall Street sees as much as 12% annual revenue growth in 2022, mainly due to higher interest rates.  BAC is a bargain with 14x forward P/E, compared to the broader Finance sector, which trades at 15.7x forward P/E.  

Furthermore, BAC’s shift in focus towards the digital space seems to be benefiting the company.  Last month, BAC reported that its Bank of America app facilitates 85% of deposit transactions on its network now.  This accounts for nearly 48 million checks that BAC customers deposited in the second quarter.

Consider BAC’s uninterrupted 21-year history of rewarding investors through dividends if you need another reason.  The company recently raised its quarterly dividend to $0.21 per share, up 16.7% from the previous quarter, putting the annual yield at 1.85%.

Should you invest in Bank of America right now?

Before you consider buying Bank of America, you'll want to see this.

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And it's not Bank of America.

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