Throughout this country, Bank of America (BAC 0.93%) branches are as common a sight as outlets of your favorite coffee chain or supermarket. The lender is one of the "Big Four" U.S. banks, alongside JPMorgan Chase, Wells Fargo, and Citigroup. As such, it's an important mover of the domestic economy.
Does it belong in your portfolio, however? Let's take a look at how the stock has performed over time, and how attractive it is as an investment.
Lending to America
Since Bank of America is something of a proxy for our economy, its performance over the past five years is in line with that classic proxy for the stock market, the S&P 500 index. A $1,000 investment in the bank made five years ago would have resulted in a total return (i.e., share-price appreciation plus dividends) of $2,010 today, not too far south from the $2,160 under the same conditions for the index.
Image source: Getty Images.
That's an accomplishment because banking is a tricky business that's full of risk. After all, lending to a person or institution money, now and forever the main activity of banks, is always a bit of a gamble. It isn't easy to grow core fundamentals and land well in the black quarter after quarter, year after year.
This bank is to be commended for regularly posting growth in key metrics. In its most recently reported quarter, for instance, the lender grew its revenue, net of interest expense, by 4% year over year, to $26.5 billion, and headline net income by 3% to $7.1 billion.
Comforting and reliable
Bank of America isn't the most dynamic bank among the Big Four -- that honor belongs to JPMorgan Chase -- nor is it the one that's changing most dramatically for the better (wave to the people, Wells Fargo). Yet it's steady and reliable and constantly delivers for its shareholders. Its stock is a solid investment with more growth potential, as long as the economic cycle is in its favor.
