Bank of America Shares Battle Back

The Tuesday selloff in bank stocks, precipitated by the unveiling of Treasury Secretary Tim Geithner s financial rescue plan, reversed course Wednesday in striking fashion. Bargain hunters looking to buy good stocks on the cheap used Tuesday's dip to scoop up Bank of America (BAC) shares. As of 11:30 a.m., they had regained half the previous day s losses.

Also driving confidence in these shares was congressional testimony. Bank of America CEO Ken Lewis on Wednesday joined executives of eight major banks, including the heads of Morgan Stanley (MS), Goldman Sachs (GS), Citigroup (C) and JPMorgan Chase (JPM) on Capitol Hill to discuss their use of Troubled Asset Relief Program funds and executive compensation.

We know that the health and strength of our company depends on the health and strength of the U.S. economy, said Lewis in front of the House Committee on Financial Services. We have every incentive to lend. And despite recessionary headwinds, we are lending. In the fourth quarter alone, we extended more than $115 billion in new credit to consumers and businesses.

Political theater and market gyrations aside, Ladenburg Thalmann analyst Richard Bove wrote last week that investors are getting too caught up in daily headlines. Bove says it s not important to parse who said what, but to focus on the company s bottom line.

The point is that this bank is cash-flow positive. It is not in danger of failure. Plus, the United States is now committed to keeping it in business, Bove wrote Jan. 5. Plus, for the record, I have always believed and continue to believe that Ken Lewis may be the best operating manager of any bank in the United States.

Bottom Line: Hold
Lewis is a great manager. However, this sector's been waiting for government's stabilizing hand for months. Volatility will remain until the plan s impact is clear.

BlackBerry Sours Despite Subscriber Growth

Investors took a bite out of BlackBerry maker Research in Motion (RIMM) on Wednesday after the company said its earnings would be near the low end of guidance, despite subscriber gains.

The recession hasn t eliminated the thumb-tapping of even laid-off white-collar workers. The Waterloo, Ontario, company added 20% more subscribers than expected during the quarter. But while many of its 2.9 million customers continued to bang out emails or text messages, they did it on lower-priced equipment. Gross margin and earnings per share for the quarter are expected to be at the low end of the previously guided ranges, the company said. (In December, RIMM forecast fiscal fourth-quarter earnings of 83 cents to 91 cents a share, revenue between $3.3 billion and $3.5 billion, and margins of 40%-41%. Street estimates called for earnings of 85 cents a share, revenue of $3.4 billion and margins of 41.9%.)

James Cordwell, an analyst at Atlantic Equities, says subscription growth but not earnings growth points to a slowdown in replacement sales.

The smart phone market is not immune to what we ve seen across retail, he says. Retailers are reducing inventory, and so even strong subscriber additions aren t translating into big shipments.

Bottom Line: Buy
Tech is a volatile sector and will be for some time, but when spending picks up this stock should be in your portfolio.

Ingersoll Rand Rises

Industrial conglomerate Ingersoll-Rand (IR) on Wednesday beat Street estimates with its operating earnings, but overhang from a costly acquisition pushed it to a quarterly loss and sent CEO Herbert Henkel into retirement.

The maker of Club Car, Hussmann, Thermo King and Trane brand industrial equipment, including refrigerators and air conditioners, posted operating earnings of 53 cents a share, well ahead of Street estimates of 29 cents a share. However, the company took a $3.7 billion write down for its acquisition of Trane, bringing the net loss to $10.27 a share. Earlier in the week the company named Michael Lemach president and chief operating officer and said Henkel would retire in 2010. Investors viewed all that news as an overall positive. By 11:30 a.m. shares had gained over 12%.

Fourth-quarter earnings had a significant amount of noise from unusual items including impairment costs, restructuring and one-time acquisition-related costs, Henkel said on a Wednesday conference call.

Ingersoll Rand may be in for a rough year. That could be tough for investors, but their patience should be rewarded, says Morningstar analyst John Kearney. While 2009 will prove to be a challenging operating environment, we expect conditions to improve in 2010, he wrote last month.

Bottom Line: Hold
Falling demand is still a serious consideration as is making the Trane acquisition work.