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Bank Of America: The 'One-Time' Benefit That Is Also A Long-Term Tailwind

Summary Points:

- Bank of America reported better-than-expected Q1 2018 results, so the market's muted reaction was discouraging.

- Even after the strong stock performance over the last year, the bank is still attractively valued.

- The tax reform bill is being spun as a one-time benefit, but in my opinion, the lower corporate tax rate significantly improves the bank's future earnings growth potential.

- As such, Bank of America is a long-term buy at today's price.

On April 16, 2018, Bank of America (BAC$) reported Q1 2018 results that beat the top and bottom line estimates, but the market was not impressed (the stock is basically flat since earnings were released). BAC shares are trading pretty much in line with the S&P 500 on a YTD basis, but looking back, the stock is outperforming the broader market by a wide margin over the past year.

I have written about Bank of America several times since early 2015, and my thoughts about this bank being a great buy-to-hold investment has not changed over the years. After reviewing its Q1 2018 results, I still believe that Bank of America is worthy of investment dollars. Actually, I am even more bullish now than I was when shares were trading in the mid-teens.

The financial community dubbed Bank of America's Q1 2018 earnings, along with those of other large U.S. banks, as weak due to the "one-time" benefit to earnings that was created by the passage of the tax reform bill. I, however, believe that the tax reform bill not only provided a big bump to earnings for the most recent quarter, but it will also positively impact the bank's future growth prospects in a material way.

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