Shih’s thesis is right in the title of his presentation: BofA: “Not the huge, risky mess you think it is.”
Shih took a look at the potential downside from two major risks to BAC stock:
- Further losses from ongoing mortgage litigation issues, stemming in part from Bank of America’s woeful acquisition of Countrywide
- Contagion from the euro crisis and exposure to troubled economies in the periphery of the eurozone
In the presentation, Shih estimates the potential losses for Bank of America from these risks and compares them to earnings growth forecasts for the company over the next two years.
His conclusion: Bank of America may be a good value play.
Note: Thanks to Vitaliy Katsenelson for allowing us to feature this presentation.