Now that hedge funds have updated their holdings for the fourth quarter of last year, we have a good idea about which stocks the world's savviest investors are gravitating toward. When it comes to bank stocks in particular, Bank of America (NYSE:BAC) is the clear favorite.

Shares of Bank of America were the second-most popular purchase among the 50 biggest hedge funds in the final three months of 2016, according to FactSet Research. It trailed only NXP Semiconductors in this regard.

Hedge funds bought $1.5 billion worth of Bank of America stock during the quarter. That's behind the $1.7 billion worth of NXP Semiconductors' shares purchased during the quarter by hedge funds, but comfortably above third-place healthcare benefits company Aetna.

A bar chart of the five most popular hedge fund purchases in the fourth quarter of 2016.

Data source: FactSet Research. Chart by author.

Bank of America is the hedge fund industry's favorite bank stock. All told, the 50 biggest funds hold $4.3 billion worth of the North Carolina-based bank's shares. That's up 52% from the third quarter of last year.

The next most popular bank stock among hedge funds is JPMorgan Chase, with a combined $3.7 billion stake among the 50 biggest funds. Wells Fargo is third at $2.8 billion, followed by Bank of New York Mellon at $2.4 billion.

The increase in hedge funds' interest in Bank of America comes on the heels of last year's presidential election, after which bank stocks soared. The new presidential administration's promise to deregulate the financial services industry and spur economic growth through a $1 trillion infrastructure plan, has investors convinced that banks will soon earn more money, thereby justifying higher valuations.

A Wall Street trading desk.

Image source: Getty.

On top of this, Bank of America went into the election as one of the cheapest big bank stocks. On November 7, the day before voters went to the polls, its shares traded for a 30% discount to book value. Fast forward to today, and they trade for a 3% premium to book value.

What's important for investors to appreciate, in turn, is that Bank of America's shares no longer offer the same value proposition as they did when many of these funds piled into its stock two or more months ago. Consequently, when you hear about hedge funds gobbling up shares of the $2.2 trillion bank, keep in mind that these reports relate to the fourth quarter of last year, not the present time.

In short, there are still plenty of reasons to be optimistic about Bank of America's fundamentals going forward, but it's hard to love its stock at today's price.

John Maxfield owns shares of Bank of America and Wells Fargo. The Motley Fool recommends NXP Semiconductors. The Motley Fool has a disclosure policy.