Bank of America (BAC 4.49%) is a well-known financial services powerhouse. It has its hands in various industry niches, like consumer and commercial banking, capital markets and investment banking, and wealth management. The business has been around for over a century, showcasing its durability.

Investors looking to put money to work in this critical sector of the economy might be focusing their attention on Bank of America. Is this top bank stock a buy, sell, or hold for your portfolio?

The case to buy and hold

One clear reason investors might consider this stock is because of Bank of America's wide economic moat. The business has developed some durable competitive strengths that minimize any chance of disruption, and that fact supports its staying power over time.

One strength is Bank of America's scale. The company generated $102 billion in revenue in 2024. And it ended the year with a whopping $3.3 trillion in assets. This massive size is beneficial because it means the business can leverage its operating expenses better than smaller rivals. What's more, investments made in marketing or digital efforts can have a bigger impact.

Another competitive edge comes from switching costs. Bank of America offers many different products and services, so it can handle a large part of a customer's financial life. These customers are less inclined to change to competitors once they become familiar and satisfied with Bank of America.

This is also a consistently profitable enterprise, something that shouldn't be overlooked. In the past five years, Bank of America's net profit margin has averaged a stellar 27.9%. Being able to produce positive net income in virtually any economic scenario is a favorable trait for any business to have.

It also allows Bank of America to pay a dividend yield of 2.34%. Plus, management is able to repurchase a lot of outstanding shares, spending $3.5 billion last quarter doing so.

Investors will take comfort knowing that Warren Buffett-led Berkshire Hathaway owns 8.9% of Bank of America's outstanding shares. There might be no one who can analyze banks better than Buffett, so this can be viewed as a stamp of approval. However, investors should also note that Berkshire Hathaway has been reducing its stake in Bank of America over the past year.

Bank of America's moat and profitability, coupled with the Oracle of Omaha's endorsement, are key reasons why investors might want to buy this stock. These are also factors that could keep shareholders on board to hold their positions.

Why investors should sell Bank of America

In 2024, Bank of America's net interest income declined on a year-over-year basis. This was after a huge rise in the previous two years. To me, this might demonstrate that the benefits of higher interest rates on profitability are a thing of the past. And that, in the near future, earnings gains could be muted.

Consequently, because the company operates in a low-growth and cyclical industry, investors should demand a cheap valuation if they're going to buy the stock. This introduces a margin of safety that provides a cushion if economic forces trend in the wrong direction.

As of this writing, Bank of America trades at a price-to-book (P/B) ratio of more than 1.2. This is a premium to the trailing one-, three-, five-, and 10-year averages. It seems the best time to invest in a business like Bank of America is when the P/B is at a low point and when investor sentiment has taken a hit. It looks like we're way past this point.

So, I think it makes sense for investors who have benefited from the stock's rise over the past 16 months to consider selling their shares in favor of more attractive buying opportunities that they're looking at.