Bove published a report last week banging the drum on Bank of New York Mellon (BK) as one of the most compelling stories in the financial sector -- with one of the worst performing stocks.
"This dichotomy creates an unusually attractive opportunity for capital gains and I strongly recommend buying this stock," Bove told clients Nov. 11.
Indeed, the bank's shares have lagged both a number of competitors and the broader market for the year-to-date. The stock is off about 5% in 2009 while the S&P 500 ($INX) is up about 23%. Bank of America (BAC), for example, has gained 12%.
There are a number of reasons for Bank of New York's under performance, including concerns over its pricing strategy, balance sheet and portfolio of loans and securities, Bove notes, but the analyst feels strongly that those issues are more than discounted for in the firm's current share price.
"Each one of the bank's core businesses is growing," Bove says. "This stock should be selling at a multiple double to its current valuation based on its growth prospects."
By Bove's calculations, the stock should trade at $42 a share in about 12 months or so, meaning it should rise more than 55% from its current level of less than $27. True, Bove is the most optimistic analyst on the Street when it comes to Bank of New York, but, as a group, analysts like this stock, too. Their average price target stands at $33 and change, according to Thomson Reuters, making the implied upside a very compelling 24% over the next year.