Bank of America’s Stock Still Cheap After 44% Rally, Brown Says: Tom Keene

By Laura Marcinek and Tom Keene - Feb 22, 2012 12:05 AM GMT+0700

Thomas Brown, chief executive officer of Second Curve Capital LLC, said it’s not too late to purchase shares of Bank of America Corp. and other lenders after U.S. financial-industry stocks rallied this year.

The reason to own Bank of America “is not because they’re going to become a great banking company, but because the valuation of the company is just too low relative to even their weak earning potential,” Brown said today in a radio interview with Tom Keene and Ken Prewitt on “Bloomberg Surveillance.”

Bank of America, the second-largest U.S. lender by assets, jumped 44 percent this year through Feb. 17, leading a 16 percent increase in the 24-company KBW Bank Index. (BKX) The Charlotte, North Carolina-based company finished last week at $8.02, or 62 percent of its tangible book value as of Dec. 31.

“If we could just get it back to tangible book value, we’ve had a pretty good investment,” said Brown, who has held Bank of America shares and is a Bloomberg contributing editor.

Brown said it often doesn’t make sense for investors to pile into a vehicle such as a mutual fund based on past performance. Retail investors often get lower returns than the mutual funds they buy into because people unsuccessfully seek to “time the market” and they are often “chasing the performance of a manager” who may not maintain past results, he said.

“The retail-investor performance in mutual funds is 600 basis points lower, 6 percentage points lower, than the mutual fund itself,” Brown said. “That’s an average.”

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Thomas Keene in New York at tkeene@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.