Suddenly, Bank of America (NYSE: BAC) has become everyone's favorite stock. Across Wall Street, analysts have been tripping over themselves to upgrade the bank in the wake of its stellar 2012 performance.

Bank of America traded up well over three percent early on Wednesday, kicking off the first trading day of 2013 by adding to the strong gains of 2012. In the last year, Bank of America shares more than doubled as the stock led the Dow higher.

In December, noted banking analyst Meredith Whitney upgraded Bank of America to a Buy rating. Whitney anticipated that the bank's improving position would lead to increased dividends for shareholders.

On Wednesday, Evercore Partners, which already had an Overweight rating on the stock, added it to its conviction list.

According to analyst Andrew Marquardt, the bank has the "greatest identifiable levers," the most upside to earnings power, and the most attractive valuation in the sector.

Evercore believes that the stock can continue to outperform the market with more spending cuts and the potential for dividend increases after the 2013 stress tests are complete.

Although Evercore is bullish on the name, its $14 price target implies only a roughly 14 percent gain, which is far less than the 110 percent rise that the stock recorded in 2012. Nevertheless, investors should be wary about the extremely bullish sentiment that currently surrounds Bank of America.

The stock's gains in 2012 were stunning, but they were primarily a result of prior terrible performance. Even at current levels, the stock continues to trade well below levels seen in late 2009. Over the last five years, shares are down around 71 percent.

It is certainly possible that the recent upgrades for Bank of America will turn out to be another example of analysts being too late in getting behind the stock. A similar phenomenon occurred to the downside in 2011 when the shares plunged.

Analysts such as Dick Bove of Rochdale Securities pounded the table on the name even as the bottom fell-out. While Bove's bullish call certainly would have been prescient if it had come at the beginning of 2012, it turned out to be a mistake and he even wrote a mea culpa in November 2011.

Bove wrote, "I failed to understand that the fears in the market concerning banking were so great that the fundamental improvements in the economy, the industry, and companies like Bank of America and Citigroup would simply be ignored."

It should be noted, however, that Bove remained bullish on BAC throughout 2012, and with the stock soaring, his analysis has certainly been at least partially vindicated even if he was too early in recommending the stock.

As always, the most difficult part of stock picking is timing. It is extremely easy to be right and end up losing money in the investing game. Bank of America shares have jumped around 34 percent in the last three months and 49 percent over the last six months. At this point, it could be risky to chase the stock and interested investors may want to look for a pullback.

The run-up in Bank of America has come as fears surrounding the European sovereign debt crisis have subsided and the U.S. economy has posted consistent, if modest, growth. If the macro environment were to deteriorate in 2013, BAC could easily fall by a third in the blink of an eye.

Even with the huge surge in the name in 2012, there was considerable volatility. Consider that between late March and late May, BAC fell from a high of almost $10.00 all the way down to a low of under $7.00. A similar plunge is likely from current levels if the market is confronted by any macro waves in the coming months.

Current holders of BAC who bought at any time in late 2011 or early 2012 are undoubtedly sitting on large profits. Although it is impossible to know what 2013 holds for the stock, the contrarian move would be to sell into the exuberance in the name.

In this case, taking Warren Buffett's advice to "be greedy when others are fearful and fearful when others are greedy" might be the best bet.




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