Many growth stocks have been crushed lately, and fears about inflation and rising interest rates are at least partially to blame. However, these could be positive catalysts for bank stocks, and Bank of America (BAC 0.07%) could be in an especially strong position to benefit. In this Fool Live video clip, recorded on Jan. 10, Fool.com contributors Danny Vena and Jason Hall discuss why Bank of America could be an excellent stock to buy as 2022 gets underway.
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Jason Hall: Chances are its earnings are going to go up. Particularly, if we do see that ladder of interest rate rises. I agree with you, Matt. I think Bank America probably has the biggest, essentially zero interest source of capital of any bank in the U.S. It's really, really impressive. I just can't get excited about it. I think that's really the problem that I struggle with, is I'm anchoring to so many great growth businesses that I love that I see down so much that I'm having trouble getting past thinking about this as a value stock.
I look at it and say 1.6 times book, which is actually on the higher end of where it's been for the past five or six years. Certainly, the high-end used to trade for a discount back when we didn't understand if it had become a good business or if it was still a terrible business. But I think it's maybe the best run at the big banks, even maybe better than JPMorgan (JPM 0.14%). You could be right.
Danny Vena: It's interesting because I actually voted Bank of America my No. 2 out of the four stocks that I could rank [This was from a show where Fool.com contributors ranked their highest conviction stocks for 2022]. I think Bank of America is a good business. It's not a stock that I own. In fact, I only own one bank stock.
At the time that I looked at the bank stocks trying to decide whether or not I was going to own one, I decided on Axos Financial (AX 1.53%), which is the bank stock that I own, and over the past decade or so it has outperformed Bank of America, and it was very close friend and neck and neck with it over the more recent one-year period. I think definitely Bank of America and actually banks in general, I think that Matt hit it on the head.
The interest rate environment, I think when we see the Fed start to raise rates, the fact that the Fed has already said it's willing to raise rates as many as three times over the coming year, I think that that is an argument for owning bank stocks. I think Bank of America is one of the top big banks to own.
I'm a Wells Fargo (WFC -0.07%) customer, but I wouldn't touch that stock with a 10-foot pole. But yeah, I think there's something to be said for Bank of America, they have a great credit card business. I have a Bank of America credit card, full disclosure. I think this is definitely one that investors should consider, and I think we're actually coming into a period where this is really where they shine in interest rate environments like this.
