It’s been more than three months since Warren Buffett started trimming down his stake in the Bank of America Corporation stock. After recent weeks’ selling, the famed investor now holds a less than 10% stake in the bank. According to US regulations, he is no longer required to immediately disclose his transactions in the company’s stock, prompting many to wonder about the stock’s future.
Bank of America Corporation (BAC) provides banking and financial services to individuals and enterprises. The company operates in different banking segments, including consumer banking, investment management, and international banking. Bank of America’s uniqueness is credited to three elements: its digital banking and innovation capabilities, customer service, and sustainable financing initiatives. They combine to ensure agility and responsiveness to customer needs, enable personalization of services, and guarantee corporate responsibility.
The bank’s leading products and services and key sources of revenue are consumer banking, investment management, and international banking. Consumer banking provides individuals and businesses access to checking and savings accounts and enables lending. Furthermore, Bank of America offers investment advice and retirement planning through the investment management division. The international banking department allows lending and access to global capital markets.
The bank serves three categories of clients, including individuals, small and medium enterprises (SMEs), and large companies. It supports them through personalized banking and investment services. Additionally, the bank offers these clients lending and business growth solutions.
Analysts have pointed out that the bank’s earnings may have peaked, suggesting it is a possible reason for Buffett’s selling. They have already revised down the expected earnings by over 3%, surrounding the stock in negativity before next week’s earnings.
We believe, however, that by selling a part of its stake in BAC, Buffett is missing out on the AI-driven growth that forms the basis of our bull thesis. The company’s virtual financial assistant, Erica, has served the bank’s customers since 2018. The bank has invested $4 billion in improving the AI capabilities of this bot. It would be a much easier task for the company to integrate AI into a product its customers are already familiar with.
Once this integration is completed, there is a good possibility that the whole customer support experience, including calls, will be driven by AI. When that happens, the bank’s operational efficiency will improve. At the same time, it will be able to cut costs associated with maintaining a customer support team.
Bank of America ranks 30th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 92 hedge fund portfolios held BAC at the end of the second quarter which was 82 in the previous quarter. While we acknowledge the potential of BAC as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as BAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
