Bank on Wells Fargo - Barron's

Barron's picks Wells Fargo & Company (WFC) as the best bet U.S. bank amid the credit crisis of 2007-8. Wells wasn't taken in by risky debt-based assets like CDOs and SIVs that have wreaked havoc on its peers; doesn't carry a large subprime mortgage portfolio; and is the only AAA-rated bank by both major credit ratings agencies. Investing superstar Warren Buffett's Berkshire Hathaway (BRK.A) recently raised its stake to 9.4% of the company. Based on recent prices, WFC's dividend yields 4.2%, while its impressive 17.1% return-on-equity ranks first among major banks. Yet shares are down 22% from their highs, and trade for just 10x 2009 earnings. "The market has priced this stock down too far. It's a significant value right now," Bob Millen of Jensen Investment Management says.

Aside from impressive numbers, Wells Chairman Dick Kovacevich has done a stellar job of building a sense of community, achieving a rare blend of loyalty from both customers and staff. Moves such as giving local managers discretion to distribute corporate donations have helped to foster a sense of teamwork, as well as allowing branches to connect better with customers. "It's all about motivation," Kovacevich says. "It resonates with people." Wells leverages this platform to maximize sales: While other banks sell just 2.5 financial products/services per customer, Wells does more than five, and is targeting eight.

CEO John Stumpf has done a good job of acquiring small, regional operations that are easy to integrate. In the current environment of deflated bank shares, he's not ruling out going after a big fish (Barron's cites Washington Mutual (WM) as one possibility). Analysts say shares have 15% upside over the coming year.

Comments

[Jake2]

Barron's may "bank on" Wells Fargo but the City of Baltimore is suing Wells Fargo "for targeting African American Baltimoreans with risky subprime mortgages, resulting in a disproportionate number of foreclosures in black neighborhoods," and the City of Cleveland is suing for WFC being a "public nuisance" and other "subprime mortgage abuses." Other newspaper coverage of this story stated that, next to Countrywide, Wells Fargo holds or did hold the "second highest number" of subprime mortgages. This info should have been included the Barron's story as well as the the Seeking Alpha coverage of the story. WFC's image is no longer "holier than thou" apparently. (See: The Chicago Sun-Times, Minn. Star Tribune, Baltimore Examiner, and other newspapers.)

[pavlov]

Wells Fargo was subprime lender number one: Credit Suisse Analysis 2007 Edition.
There are simply lying when they aren't taking any write-downs!
They held 13% of the market in 2006.
The truth will emerge...trust you me...

[dectra]

Apparently Duke has an axe to grind with Wells Fargo. Had he/she done a little more research, they would have found that Wells did have sub prime exposure, and at the beginning of the downturn took steps to mitigate that exposure as far back as April of 2007.

www.marketwatch.com/ne...

I, and many others invest for one reason, and one reason only: to make money. If Duke wants squeaky clean moral companies to invest in, there are plenty of funds set up to provide that type of investing exposure. As for the petty name calling cited in his post, I'll let the tenor of his argument speak for itself.

[doctorD]

Wells Fargo is a company of integrity. The management has done a good job and set the company on a course of profitability. The recent "bumps in the road" should not detract from the long-range soundness of the WF strategy and sound management. I predict that by year's end, shareholders will be pleased they have stayed the course.