RF Favorite Longs - BAC

(Source: Morgan Stanley-click image above)

Bank of America is one of my favorite investment ideas in the entire market. The stock carries it's risk because it is VERY difficult to truly understand if the bank write-downs or losses will be one-time occurences or may last a few quarters. The main upside will take time and I believe the Merill Lynch will be the key driver. Merill Lynch was a MONSTER bank in my early trading days, I remember trading that stock at like $90 bucks a share until Stan "the man" O'Neill destroyed the company. Anyways, they will probably earn $.50 cents a share this year, so the stock may be fairly valued today but if the "bear" case scenario highlighted above doesn't occur, Bank of America should be able to earn $2.50 - $3 EPS (my view, lower than MS estimates). In my view, it will be 2011 or roughly 24-30 months until we see that and if which case, if you apply a historic 10x PE multiple to those earnings, give Bank of America a $25-30 price target.