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Establishing a Substantial Holding

Given the bright future I see for this company, I am going to more than double my position.
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I am going to buy 3,000 shares of Bank of America (BAC) at $12.92 as soon as you receive this Alert.

This is a fairly new position in the fund and given the opportunities for the company over the next several years in mortgages, capital markets, investment banking and core deposits, I want to make it a sizable position. BofA is a financial service supermarket and now that its balance sheet has improved and the company has raised the needed capital from the government's stress test, the company can focus on running its business.

I expect the company to repay its TARP bill by the end of the year, which will be a positive catalyst when announced. The company is one of the largest mortgage originators (Countrywide) and as rates remain low and refis continue, this will help lead to better earnings in this division.

The capital markets have been on fire and through its Merrill Lynch acquisition, BofA has been gaining share on both the equity and fixed-income groups, although margins remain weak. The company has also gained share in underwriting within investment banking benefiting from Lehman's demise.

BofA has increased its loan loss reserves close to 4% -- JPMorgan Chase (JPM) has the highest provisioning in the industry -- which helps to cushion further losses. I expect loan losses to decline as the economy improves and the stock should respond favorably. Overall, earnings power of $3 per share is possible and the stock is very cheap on that basis.

After my trade, I will own 5,800 shares, or 2.85% of the portfolio.

Regards,

Jim Cramer

Click here to trade alongside Cramer!http://www.thestreet.com/staticFull/aap-td-ct-offer_alert.html

DISCLOSURE: At the time of publication, Cramer was long Bank of America and JPMorgan Chase.