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Cramer: Forget BofA’s Lewis Drama – Buy This Stock

Tuesday, 4 Aug 2009 | 8:44 PM ET

As outraged as Cramer was that Bank of America’s shareholders had to pay for CEO Kenneth Lewis’ mistakes, the Mad Money host was willing to set those feelings aside to focus on the stock itself. Right now, both the fundamentals and the charts seem to predict that BofA could “rally another 50%,” the Mad Money host said, “and maybe even double.” And that’s on top of the 400% move that Bank of America has had already this year.

Off the Charts
Cramer discusses what Bank of America's settlement mean for your portfolio.

Technical analysts anticipate a big move in BofA as a result of something called volatility expansion. A quiet period in a stock often gives way to a significant amount of turnover, Cramer said, which ends up pushing the stock price higher. Bank of America treaded water from May to July, hovering between $12 and $13, and very recently broke out to almost $16. The last breakout resulted in a near $12 gain, and the chartists think something very similar will happen again. They’ve put a $25 price target on the stock.

What about the fundamentals? Cramer called Bank of America a cyclical stock, saying the company stands to a lot of money if the economy turns. This is already the “dominant retail banking player in this country,” he said, with 12% of all US deposits covering 82% of the population. At the same time, BofA is building its reserves, and the real estate that once weighed down its books is becoming a moneymaker as housing rebounds.

Cramer also posed this question: If Bank of America is doing this well with Lewis at the helm, and neither the Street nor the feds like the CEO, how well could the stock perform if he were gone? This franchise is “far from wrecked by Lewis,” Cramer said, because Sallie Krawcheck never would have joined the team if it were.

So forget about Ken Lewis. The company’s talent pool is deep, and the reasons for buying this stock go far beyond the CEO’s problems. Plus, BAC traded as low as $3 because Wall Street assumed nationalization was all but inevitable, but the stock should never have sunk to so low a level. Now that we're seeing real signs of a recovery, Cramer thinks the upside potential here is “huge.”

“The thesis is a turn in the economy,” Cramer said, “and I think perhaps the single best vehicle to play that turn right now is the Bank of America.”

Cramer’s charitable trust owns Bank of America.

Call Cramer: 1-800-743-CNBC

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