Here are a few observations today concerning the Bank of Ireland (Ticker: IRE) –

The stock gapped higher again today and tagged $3/share, before investors stepped in to take their profits – and in the process pushed the stock price all the way down to $2.47/share.  That was a -17% pull-back from the $3/share highs in a little over an hour.   Keep in mind that there were buyers at around $1.40/share in the stock from November 24, 2010 who already had a “doubler” on their hands and wanted to take their profits.  OK.

What we like is the fact that buyers stepped in to purchase shares following this sell-off this morning and pushed the stock back higher to currently approx. $2.82/share.

We would have of course preferred that sellers and buyers would have exchanged shares without such a strong pull-back, but we are encouraged at this point with what appears to be fresh buyers purchasing the stock this late morning.

We are continually weighing out the risks that we face as common stock shareholders in the face of the uncertainty that surrounds the Bank of Ireland’s ability to restructure their balance sheet  AND raise capital to meet the Tier 1 capital ratio that the Irish government has required above the 8% Basel agreement levels.  For the Bank of Ireland, this means an additional 2.2 billion euro needs to be raised by the end of Q1, 2011.  We are weighing these risks against the hope of having a solid investment in Ireland’s leading bank – which we have established during Ireland’s darkest hours commercially in recent history.

If our investment pays-off, the reward may be very considerable.  From a technical (chart based) price standpoint, we have no problem visualizing the Bank of Ireland stock rising to $8 to $10/share within a relatively short period of time.  It is not unreasonable to target the recent March 2010 lows of approx. $5.55/share or the April 2010 highs of approx. $10.50/share – now that the Irish government has passed its first vote for the 2011 budget and is in the process of meeting its requirements for further access to European Central Bank funding.

There is a lot of uncertainty yet in the air.  The U.S. Federal Reserve’s actions to bolster the economy AND the European Central Bank’s recent realization that they too must work to keep investors from becoming fearful, may bode well for financial stocks such as the Bank of Ireland which are coming off recent very distressed levels.

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