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Top Stocks 2013: Bank Of America

 December 28, 2012 04:23 PM

by Mike Cintolo, editor Cabot Top Ten TraderMy pick for 2012 was Lennar (LEN); that selection stemmed from my belief that the housing sector was poised for a big turnaround.

For 2013, I see another much-hated group ready to turn up — financials. That's why I'm making Bank of America (BAC) my pick of the year.

As a group, the big banks have now had five full years to shape up. They've been helped along by an incredibly easy Federal Reserve (now buying $40 billion of mortgage debt every month) and, ironically, a housing rebound, which has improved many firms' balance sheets.

[Related -Bank Stocks: The Misbegottenness of the Volcker Rule Truly Knows No Bounds]

And, though most investors don't know it, earnings for the group are buoyant.

As for Bank of America itself, it's likely to pass an upcoming stress test and finally be able to return $5 billion to $10 billion to shareholders through a dividend boost and share repurchases.

Throw in the fact that earnings are projected to leap 129% next year to 96 cents per share, and the fact that the stock actually hit new yearly highs in December (even as the market was struggling), and it's clear to me that the turnaround is underway.



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