Why Bank of America Sank and Best Buy Soared Last Week

Last week was one of the busiest in a long while for the stock market. We learned that the Federal Reserve will continue to taper its monthly bond purchases. We learned that pending home sales have thankfully picked up. And we learned that the unemployment rate dropped in April to 6.3%, the lowest rate since the middle of 2008.

But none of these things are to blame when it comes to the performances of Bank of America (NYSE: BAC  ) and Best Buy (NYSE: BBY  ) , which sank and soared over the past five days, respectively. Bank of America finished the week down by 4.4% while Best Buy was up 7.3%.

For Bank of America, the week couldn't have started on a worse note. On Monday, the nation's second largest bank by assets announced that it had suspended its recent dividend increase at the behest of regulators. The problem stemmed from an accounting error that led Bank of America to overstate its regulatory capital levels.

The news hit the bank's stock hard, sending shares down by more than 6% on Monday and causing analysts to second guess their confidence in the Charlotte, N.C.-based lender. Among others, CLSA's Mike Mayo recommended that investors sell their shares in Bank of America and replace them with, of all others, Citigroup, which, it's worth noting, has also had its 2014 capital plans rejected by the Fed.

BAC Chart

"One of our questions at the coming May 7 annual meeting is whether [the bank] is too big to manage," Mayo wrote to clients shortly after Bank of America's disclosure on Monday.

Meanwhile, on the other end of the S&P 500's (SNPINDEX: ^GSPC  ) spectrum of performances, shares of Best Buy soared last week, posting gains in all five trading sessions. To be clear, the precise catalyst for the climb remains to be seen. While shares are down by 36% since the beginning of the year, they're nevertheless up by 18% since the middle of 2012.

BBY Chart

The ailing electronics retailer has struggled to compete against the likes of Amazon.com and Costco, both of which are able to sell many of the same goods as Best Buy at considerably reduced prices. This reality has forced the company to experiment with alternative models.

Most recently, it was announced on Thursday that Sony would join Samsung, Apple, and others by opening dedicated vendor showcases in Best Buy locations. The objective is to drive traffic into the stores and then convert the flow into paying customers. While it remains to be seen whether this will work, it's certainly an understandable tactic for a company that's falling further and further behind competitors.

Looking for a great stock to buy today?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303%! You don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2942243, ~/Articles/ArticleHandler.aspx, 11/27/2014 5:58:07 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement