Bank of America Corp., the second- largest U.S. lender, had more than $300 million of its shares acquired by Lansdowne Partners Ltd. as improved capital levels lead Meredith Whitney and other analysts to tout the stock.
Lansdowne, the largest European hedge fund that invests in equities, purchased 26.5 million shares in the fourth quarter, according to regulatory filings yesterday. Moore Capital Management LP, the fund run by Louis Moore Bacon, added almost 6 million shares valued at more than $85 million as of Dec. 31.
Bank of America was the best performer in the Dow Jones Industrial Average last year as Chief Executive Officer Brian T. Moynihan rebuilt capital, cut costs and sold assets. The Federal Reserve will allow the Charlotte, North Carolina-based lender to increase its quarterly dividend this year to 3 cents a share from 1 cent, according to analysts surveyed by Bloomberg.
“People really feel like, from a capital return perspective, BofA's future will be brighter than some of its competitors,” said Douglas Ciocca, CEO of Leawood, Kansas-based Kavar Capital Partners LLC, which manages about $265 million. “A penny a share has not been an acceptable status quo and they are readying people to expect” an increase, he said. “That seems to be a good reason to get behind it.”
Bank of America, which more than doubled last year, has climbed 4.5 percent in 2013 through yesterday, trailing the 8.2 percent advance for the 24-company KBW Bank Index. The shares closed last week at slightly over $12.
Lansdowne, founded in 1998 by Steven Heinz and Paul Ruddock, also bought shares of New York-based JPMorgan Chase & Co. and Wells Fargo & Co. Moore held a total of 11.8 million Bank of America shares valued at $137 million on Dec. 31.
Adage Capital Management LP and Arrowstreet Capital LP, both based in Boston, each added 14.7 million shares to their holdings in the bank, filings show. Adage sold 2.9 million shares of San Francisco-based Wells Fargo in the fourth quarter.
“Bank of America is the stock to own this year,” Whitney, founder of Meredith Whitney Advisory Group, said Feb. 7 in an interview with Tom Keene on Bloomberg Television. Moynihan, 53, has been underestimated and shares of the lender will climb to $15 in the next six to nine months, she said.
Moynihan has targeted $8 billion in annual cost cuts and is boosting capital, in part by selling more than $60 billion in assets since he took over in 2010. Moynihan said Dec. 4 he's confident Bank of America will pass the next round of Fed stress tests, which may lead to a higher dividend or share repurchases.
Revenue at Bank of America and New York-based Citigroup Inc. will improve faster than at Wells Fargo and JPMorgan over the next three years, Richard Staite, an analyst with Atlantic Equities LLP, said yesterday in a note. Investors should favor those banks because their funding costs will improve and they will be hurt less by a projected drop in mortgage revenue.
“The restructuring, cost-cutting and capital improvement story at Bank of America and Citigroup are increasingly well-understood by the market,” Staite wrote. “Less well- appreciated is that revenue prospects against peers are also looking better.”
Even so, other investors cut their Bank of America stakes. Perry Corp., the hedge-fund firm run by Richard Perry, exited its position in the lender, selling 7.5 million shares in the fourth quarter, filings show. Boston-based Geode Capital Management LLC reduced its stake by 6.4 million shares to 71.3 million.
Money managers who oversee more than $100 million in equities must file a Form 13F with the Securities and Exchange Commission within 45 days of each quarter's end to show their U.S.-listed stocks, options and convertible bonds. The filings don't show non-U.S. securities or how much cash the firms hold.
Bank of America has broadened its “penetration into all parts of Main Street's financial well-being,” Ciocca said. “They have done what they can to flex the muscle of the full franchise.”