Dear Mr. Berko:

In February 2009, I bought 1,000 shares of Bank of America Corp. at $3 in my individual retirement account, and I’ve never made such a big profit in a stock. Please tell me whether I should sell the stock or I should continue to hold it for more gain. I am 66 and should have just enough in my IRA, in my defined-benefit plan and with Social Security to retire if I work for another three years, which I plan to do. 

H.G., Gainesville, Fla.



Dear H.G.: 

Sell 950 shares of Bank of America stock immediately, and keep 50 shares for old times’ sake.

Bank of America (BAC-$13.34) – bah, humbug, yuck, yeech and urrgghh! – is an ignominiously immense commercial/global real estate services and equipment (commercial aircraft, data processors, container ships, oil rigs, sky cranes, refrigerated containers, etc.) financing and leasing conglomerate. BAC’s 263,000 employees are also active in global wealth management services, treasury management, foreign banking, commercial lending and residential mortgages. They also provide security clearance and custody services, debt and equity underwriting, commodity trading and hedging, currency trading, derivatives and credit default swaps. Of course, insurance, risk management products and services, stock brokerage, trust department services, municipal bond underwriting, fiduciary portfolio services and credit card services are also important revenue functions. And BAC’s mindless minions are into option trading, mergers and acquisitions, private equity investments, debt securitization, inventory factoring, hedge fund management, and corporate advisory services. Other departments include cash management services, retirement and benefit plan services, currency trading, and carbon credit trading. Then, as an afterthought, BAC manages 5,600 banking centers and 16,600 ATMs in 30 states. And from these venues, management will willy-nilly repossess your home and rip off small depositors with onerous credit card charges, horrendous personal loan add-on expenses, ugly fees to park money in checking accounts and then fees to get it back, and predatory bounced-check charges, which are a tort lawyer’s dream.

Sadly, neither Brian Moynihan, its unpopular CEO, nor the dotty board of directors (whose members are paid an average of $290,000 to attend four meetings a year) has an inkling that BAC has the worst customer service in the industry. But BAC makes money! This year, BAC should earn 94 cents a share on $91 billion in revenues, and next year, it could be $1.24 on $92.4 billion in revenues. BAC has more constantly moving parts than a warehouse of Rubik’s cubes. BAC is like a huge vampire squid with its leaching tentacles, slithering into anything that smells of money. BAC is so huge that if it loses a tentacle or two, neither Moynihan nor his board will have time to discover the loss because it’ll grow back in a few months.

But BAC’s biggest risk over the coming couple of years is a $2.2 trillion mortgage portfolio, which, in blind lust, was purchased from the crooked Countrywide Financial Corp. Countrywide was run by an allegedly corrupt Angelo “Big Tuna” Mozilo, who ought to be boiled in oil, branded and then imprisoned. This acquisition and that of a bankrupt Merrill Lynch in 2008 resulted in a government bailout. The liabilities from these deals still suck marrow from BAC’s bones.

Moynihan, who inherited these problems as CEO, underestimated the potential damage, and his rocky leadership has failed to inspire confidence. BAC’s various subsidiaries are too slowly returning to health, which is why the shares trade at depressed levels compared with those of the company’s peers. However, the bank has an adequate balance sheet, with $26 billion in loan loss reserves and $135 billion in tangible common equity.

A financial institution of this sprawl and complexity is inherently difficult to manage. BAC’s huge size can provide economies of scale, but economies become counterproductive when the head can’t figure out where the feet are going. This bank seems to be unmanageable, and that’s bad for shareholders, the public and the economy. There’s been talk that regulators will decide to break up this clumsy bank to prevent implosion. Meanwhile, the Street’s consensus suggests that BAC shares will not trade at more than $16 this year. And you might wish to preserve that huge profit and put the money in a dividend growth stock.