Graduate Student

FINC 734-M01 |

Fundamental Analysis Project |

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Kai Ye |

0656992 |

Introduction:

In this project, a fundamental analysis of BAC (Bank of America Corporation) will be given. The end goal of this project to produce a value that an investor can compare with the security’s current price, with the aim of finding out what kind of position to take with that security (undervalued = buy, overvalued = sell or properly valued=hold). There are three major fundamentals such as macroeconomic factors industry factors and company characteristics will be considered. In addition, factors such as politics, interest rate, inflation, market and investors’ psychology should also be analyzed. At last, the following valuation techniques such as Dividend Discount Model; Valuation of Free Cash Flow to Equity Holders and Valuation of Operating Cash Flow will be used in the project.

I believe the most important goal of a stock’s fundamental analysis is provide some basic and useful information about the stock to the investors, and help them make rational decisions when they are trying to invest. There are many factors that will have impacts on the value of a security. And a fundamental analysis is all about collecting and analyzing those factors.

1. A review of economic situations of United State and the world

First of all, let’s get down to the macroeconomic influence. As we all know, the world’s economy is getting out of the shadow of the crisis, it is recovering at a low speed.

In 2013, the world economy kept growing slowly, the degree of dependence on stimulus was reduced, and the recovery tended to be stable. The U.S. economic growth was slightly higher than last year; the Euro zone was still difficult to get rid of negative growth; and Japan was expected to maintain low speed growth, major emerging economies’ slowing trend was expected to reverse. The global financial situation was improved, but the possibility of turmoil was still there. International...