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Is Bank of America a ‘Buy’ After Citi Downgrade?

Despite a decline in Bank of America shares Tuesday following a Citigroup downgrade, trader Simon Baker said there’s a litmus test for whether to buy the stock.

“If you think there’s going to be a recovery in housing, you own Bank of America. If not, stay away from it,” the Baker Avenue Asset Management CEO said on “Fast Money.” “JP Morgan’s a completely different type of firm. Really well capitalized, great management team, it’s very cheap, and it’s got a catalyst coming up.”

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Playing the momentum in the financial sector was must, Baker said.

“This is a stock-picker’s market,” he said. “When I’m talking about the financials, I’m not saying be married to them and own them all year. When you look at Bank of America up 45 percent for the year, you look at some of the momentum in them, you have to participate on them. And in this type of environment, you need to own the financials.”

Citi downgraded Bank of America to “neutral” from “buy.” BAC traded at $3.97 midday, down more than 3 percent.

Joe Terranova of Virtus Investment Partners said expense management was a factor to consider.

“In a correction here, the buy orders, the resting buy orders, I will be placing them underneath the market for a BMO, for a Wells Fargo, for a BNC,” he said.

Trader Stephen Weiss said multiples were “dirt cheap” on quality names such as JP Morgan but took a broader view beyond the banks.

“I think you can be long and in this market and treat financials largely as you treat consumer staples. They may be a slow — and in the case of JP Morgan — dividend-paying stock,” he said. “But even there, I would rather go for my defensive in areas of the economy that I either feel have bottomed or are potentially going to grow significantly.”


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Trader disclosure: On Feb. 14, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Terranova is long VRTS; Terranova is long LQD; Terranova is long SWN; Terranova is long CSCO; Terranova is long TBT; Terranova is long SBUX; Terranova is long FXE; Terranova is long OXY; Terranova is long MCD; Terranova is long JOY; Terranova is long AXP; Terranova is long EMC; Terranova is long IBM; Terranova is long UNG puts; Terranova is long short AAPL put spreads; Baker is long AAPL; Baker is long JPM; Baker is long AMZN; Baker is long RL; Weiss is long QCOM; Weiss is long BRCM; Weiss is long WLP; Weiss is long HK; Weiss is long EUO; Weiss is long CSC; Weiss is long MOS; Weiss is long NS; Weiss is long ETP; Weiss is short AAPL puts; Weiss is short AMZN puts; Weiss is long MT; Weiss is long BTU; Weiss is long MDRX;

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