Bank of America (BAC): Time to Buy?

With the valuation of Bank of America (NYSE:BAC) having plunged in 2011, it may be time to take a closer look at the giant bank, especially for those with a longer term outlook.

Bank of America now has a valuation of $55 billion, with a book value of $228 billion and cash of 682 billion. Tangible book value is $144 billion.

Over the last year, Bank of America has been the worst performer among larger financial institutions, having plummeted 60 percent during that time.

Citigroup (NYSE:C), Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) dropped by 44 percent (Citigroup) and 45 percent, while JPMorgan fell by 23 percent.

It seems the major concern investors have for Bank of America is its credit quality; the reason for its poor performance as measured against its peers.

With a P/B of 0.25 based on the assumption of a conservative marked-to-model, you can acquire Bank of America assets at 25 cents on the dollar.

Based upon the multiples of its peers, Bank of America has an upside of about 280 percent to 400 percent, depending on which bank it's being measured against. Either way, that is a lot of potential, although it comes with obvious significant risk, the reason the financial institution remains under pressure.

With an estimated $1.3 trillion in long-term investments held by Bank of America, and virtually no way to concretely ascertain how accurate that estimate is, it requires faith in the industry and specific bank that the model used to generate the estimate is in fact one that is conservative in nature.

That's more faith than I have concerning any of the major bankers, and so with that in mind, a lower valuation, in my opinion, isn't enough for me to pull the trigger on Bank of America. There are too many variables and uncertainties which can't be accurately assessed to enter even at this low price point.

Bank of America was trading at $5.5250, falling $0.0750, or 1.34 percent, as of 11:13 AM EST.