8 Best Value Stocks to Invest In According To Warren Buffett

5. Bank of America Corporation (NYSE:BAC)

Expected Earnings Growth 2024: 6.20%

Latest P/E Ratio: 10.9

Warren Buffett’s Q2 2024 Stake: $41.10 Billion

Number of Hedge Fund Investors as of Q2 2024: 92

Bank of America Corporation (NYSE:BAC) is one of the best value stocks to invest in, according to Warren Buffett, owing to its status as one of the biggest banks in the US. While Buffett has been unloading stakes in the financial conglomerate, it does not mean its long-term prospects are doomed.

Bank of America Corporation (NYSE:BAC) is a favorite among hedge funds, with 92 funds holding stakes totaling over $48.1 billion in Q2 2024. Warren Buffett, a long-time admirer of banking stocks, particularly BAC, has maintained Berkshire Hathaway as one of the top shareholders with a $41.10 billion position.

The steepening of the yield curve is one factor that should work for Bank of America Corporation (NYSE:BAC) even as interest rates drop. After approximately two years, there is no longer an inverted yield curve, meaning that short-term Treasury bills now offer higher yields than their longer-term counterparts. Although it’s commonly believed that banks perform more efficiently in an environment with higher interest rates, this isn’t always the case.

Banks also require a steep yield curve because they typically borrow short-term and lend long-term. A steeper yield curve will lead to increased net interest income (NII), a primary source of income for Bank of America.

With a huge deposit base of almost $2 trillion, Bank of America Corporation (NYSE:BAC) revenues have increased by 11% over the past ten years. On the other hand, earnings are expected to increase by 6.20% this year, allowing the bank to continue rewarding investors with its 2.61% dividend yield. Additionally, it continues to trade at a discount with a price-to-earnings multiple of 10.9.

ClearBridge Value Equity Strategy stated the following regarding Bank of America Corporation (NYSE:BAC) in its first quarter 2024 investor letter:

“We added several new positions during the quarter. Our largest new addition was Bank of America Corporation (NYSE:BAC), one of the world’s leading financial institutions, serving some 66 million consumer and small business clients across the U.S. as well as large corporations, financial institutions and governments globally. We believe that the interest rate pressure that Bank of America faced in early 2023 has subsided, and risks surrounding deposit outflows have abated, which should allow the company to improve its book value and capital growth as well as benefit from a rebound of capital markets activity.”