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🌤️ Happy Tuesday
Good morning, welcome back to our Tuesday morning MARK IT. issues! We'd like to thank you for reading along as we navigated releasing these issues on different days and times.
With classes and work starting back up for many, we’re looking forward to bringing more analysis and performance updates as the weeks go by. If content like this interests you, we ask that you share it with a friend or family member who might also take something from these issues!
Read time: 2 minutes
WEEK IN REVIEW
📈 Market Performance
S&P 500 (5-day), via Google Finance
Similar to last week, this past week was relatively consistent for the S&P 500. Week-to-date, the index gained around 0.41% with a Thursday high of 4,455 points. However, much of this progress appeared to reverse late Friday as the index dropped roughly 2.18%. Ultimately, a recovery on Monday after some morning volatility brought the index back to around 4,430 points.
Much of the same is true for the tech-heavy Nasdaq composite, which increased just shy of 1% since last week. While the changes in value for the Nasdaq index can be traced back to tech and IT stocks, some of the biggest movers for the S&P were healthcare and bio stocks. (Source: Investopedia)
STOCK #1
Bank of America (BAC)
Bank of America sign by Mike Mozart, via Flickr
Over the past six months, BAC shares have been down nearly 16%. Some of this initial decline in the company’s value can be attributed to the banking sector headlines that dominated the finance world early this year.
It’s not exactly accurate to say that Bank of America is still dealing with the effects of the Silicon Valley Bank or First Republic Bank collapses, but the company hasn’t properly recovered the way other bank stocks have.
This decline in stock value, however, does create an opportunity for long-term investors. Bank of America is currently the #2 bank in the US behind JP Morgan Chase. This means the company should weather this rough period and recover. In the meantime, long-term investors have slowly been picking up shares and are hoping for a payoff in the coming years.
BAC (6-month), via Google Finance
🛑 Decreasing cash flows: The past 10 years have seen cash flows decreasing year over year, which may pose a risk to company operations and growth capabilities.
✅ Solid dividend: With a 3.34% dividend yield, BAC shares pay a higher-than-average dividend and have a consistent payment record. This may be a good catch for dividend investors.
✅ Undervalued according to DCF: Based on our discounted cash flow model, a single BAC stock at Monday’s market close price of $28.76 is more than 40% undervalued. However, remodeling using quarterly cash flow updates is key.
🛑 High debt: Of the total Enterprise Value (EV) of Bank of America, debt is approximately 75% (679B) compared to a market cap of 25% (228.5B).
ONE MORE THING
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