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MAY 14, 2007
A Bank To Bank On  Some investors worry about the Dow Jones industrial average's speedy rise above 1300 in the face of a slowing economy exacerbated by the housing slump. "It's time to get defensive," says Carl Birkelbach, chairman and CEO of Birkelbach Investment Securities. He thinks the bull market has hit a "point of maturity where caution must be exercised." He has taken profits on his winners and bought "quality" stocks that earlier had pulled back. "Bank of America (BAC
) is a good defensive stock that has lagged the rally," says Birkelbach, who loaded up on shares. The stock is down from 55 in November to 51.03 now as subprime lending woes dented banking stocks. And BofA has agreed to buy LaSalle Bank, Chicago's No.2 bank, from ABN Amro (ABN
) for $21 billion in cash, which has also affected the stock. "It's incredible that such a blue chip is trading at just 10 times estimated 2007 earnings, with a 4.41% dividend yield," says Birkelbach, who sees the stock at 65 in a year. The price BofA will pay for LaSalle "is undeniably expensive, but it completes the bank's franchise across the largest markets in the U.S.," says David Hilder of Bear Stearns (BSC
), which did banking for BofA. He rates it "overweight" and sees earnings of $5.51 a share in 2007 and $5.50 in 2008. They don't reflect the LaSalle Bank deal.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
 By Gene G. Marcial
BW MALL
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