2012's top performer
Buzz BAC
P/E ratio: 11.4
Earnings growth: 10%
Yield: 0.4%

Financial stocks in general and Bank of America (BAC, Fortune 500) in particular bounced back in 2012, as fears about the global economy and housing market fell modestly. In fact, BofA shares were the biggest gainers in the Dow.

The latest buzz: BofA's surge is a sign the worst of the storm is over for the bank and the financial sector.

What to do: Don't believe the hype; take your profits.

BofA has announced several large settlements to deal with the multitude of legal risks it faces owing to its acquisitions of Merrill Lynch and Countrywide. Yet the Charlotte-based bank still has more exposure than many rivals (in October it was hit with another suit by the Justice Department over questionable practices at Countrywide).

Related: Bank of America sued for alleged mortgage fraud

Edward Jones analyst Tom Kersting noted in a recent research report: "BofA does not have a large cushion for any unexpected losses that may result if we see any shocks to the system or large litigation charges."

Chris Bingaman, manager of the Diamond Hill Financial Long-Short fund, says he sold his stake because after BofA's stellar rally, other banks like Citigroup (C, Fortune 500) are a better buy.

  @lamonicabuzz - Last updated January 30 2013 05:20 AM ET
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