We Study Billionaires - The Investor’s Podcast Network TIP293: Intrinsic Value Assessment of Bank of America w/ Bill Nygren (Business Podcast)
Apr 19, 2020
Bill Nygren, CIO at Oakmark Funds, shares his expertise in assessing intrinsic value, focusing on Bank of America. He discusses the bank's competitive advantages amid recent stock price drops and how low interest rates affect profitability. The conversation explores the competitive dynamics among top U.S. banks, regulatory impacts post-2008, and valuation insights. Nygren also addresses the merits of investing in physical gold versus financial assets, highlighting long-term strategies for navigating market volatility.
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Bank of America Overview
- Bank of America is one of the largest money center banks, excelling in consumer banking and wealth management.
- They have a strong management team, balance sheet, and potential for growth due to their leading consumer-facing technology.
Focusing on Long-Term Value
- Oakmark focuses on long-term business value during crises, rather than short-term market fluctuations.
- Bank of America's stock price drop represents years of free cash flow, indicating potential undervaluation.
Adapting to Low Interest Rates
- Low interest rates negatively impact banks like Bank of America, especially with a narrow yield curve spread.
- However, banks have adapted by increasing fee-based revenue, and Bank of America's diverse revenue streams and strong capital position should help them weather the storm.