We recently published a list of Warren Buffett Disciple Guy Spier’s 10 High Conviction Stock Picks. In this article, we are going to take a look at where Bank of America Corporation (NYSE:BAC) stands against Guy Spier’s other high conviction stock picks.
Guy Spier’s Aquamarine Capital Management is a Zurich, Switzerland-based investment manager that employs the same long-term oriented, value investment approach as Warren Buffett, who Mr. Spier proudly considers himself a disciple of.
Spier earned a degree in philosophy, politics, and economics from Oxford University in 1988 and followed that up with an MBA from Harvard Business School. Foollowing that, he spent several years working as a researcher and investor on Wall Street, including stints at Braxton Associates and Buffett’s Berkshire Hathaway, the latter of which inspired him to launch his own value investing fund in 1997.
Spier is noteworthy in the investment world for his $650,100 lunch (alongside Mohnish Pabrai) with Warren Buffett in 2007, which was purchased through a charity auction. Spier took several important lessons from that meeting, including the necessity of saying no, and ultimately wrote a book about his takeaways from that lunch and his broader investment journey entitled ‘The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment’.
Mr. Spier makes all of his firm’s investment decisions himself and is an even more ardent value investor than Buffett, holding on to many of his positions for several years without touching them. In the second quarter the fund added two small new positions to its 13F portfolio while otherwise leaving the rest of it untouched. Its 13F portfolio held $263 million worth of assets on June 30, 74% of which were invested in finance stocks.
Aquamarine’s total return stands at 874% since inception through the end of 2023, or 9% annually, outperforming the S&P 500’s 717% returns during that period. Spier’s fund hasn’t been as successful in recent years however. It returned 18.7% last year, which underperformed the market, the sixth-straight year it’s failed to top the market. 2000, 2002, and 2006 were three of the fund’s strongest years, as it beat the market by more than 20%.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here). That’s why you should pay close attention to this important indicator.
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Bank of America Corporation (NYSE:BAC)
Value of Aquamarine Capital Management’s 13F Position (6/30/2024): $30.5 million
Number of Hedge Fund Shareholders (3/31/2024): 85
Warren Buffett’s second-favorite stock, Bank of America Corporation (NYSE:BAC), ranks as Guy Spier’s third-highest conviction equity. Mr. Spier’s firm has owned 767,845 BAC shares since the first quarter of2019, while Buffett’s holding company Berkshire Hathaway owned a staggering 1.03 billion shares as of March 31, but has been selling off BAC shares for several quarters. Other money managers aren’t nearly as bullish on the investment bank right now; their ownership of the company fell by 16% during Q1 to the second-lowest mark in the last decade.
Bank of America Corporation (NYSE:BAC) suffered an expected decline in net interest income during Q2, to $6.9 billion, but that was overcome by an increase in non-interest income. The company’s earnings were evenly split between its consumer and business divisions, which included strong growth in both its consumer banking division (net new checking accounts topped half a million for the first six months of 2024) and commercial segment (adding thousands of small businesses). Zelle adoption has been a major driver of growth for both segments, with Bank of America’s banking app now boasting more than 47 million active users.
ClearBridge Value Equity Strategy discussed why less interest rate pressure should improve Bank of America Corporation (NYSE:BAC)’s prospects going forward in the fund’s Q1 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.”
Overall, BAC ranks 5th on our list of Guy Spier’s high conviction stock picks. While we acknowledge the potential of BAC, our conviction lies in the belief that 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 more promising than 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 is originally published at Insider Monkey.