Tax Reform in This Election Year: It's Not Likely
Which Credit Card Rewards Does the IRS Care About?If you are looking for value in the stock market there are never a lot of choices in relation to the number of public companies available. While there should be more opportunities in a down market than in an up market, from my perspective that is not always true. In any market you are going to find, by definition, that half of the public companies are above the mean in terms of value and half are below. Among those below the mean, further analysis usually indicates that most of these stocks deserve to be there.
The following is a 10-year chart for Wells Fargo & Company (NYSE: WFC):
I have been following the stock of this company, that I do banking with (as well as others) for several years. Among the many reasons to have an interest in the stock is that one of its major shareholders is Berkshire Hathaway (NYSE: BRK.A and BRK.B). If Warren Buffett is buying a stock, one must take a look even if only for educational purposes. So I have been watching and not buying. As anyone can plainly see, WFC would have been worth buying at almost any point in the last ten years. Some points better than others, but all leading upward in the long run.
But I did not buy it and I certainly wish I had. It's just that the stock seemed a little pricey each step of the way, so I did not invest. I find myself in the same position today as in the past. I love the 3.1% dividend yield, the balance sheet, management and think there is still room to grow. On the other hand, I am not crazy about paying for a bank stock with a P/E over 14 and a P/S over 3, especially when its major competitors like Bank of America Corp. (NYSE: BAC), Citigroup, Inc. (NYSE: C) and JPMorgan Chase & Co. (NYSE: JPM) all have lower multiples. Perhaps it is worth the premium. As Warren Buffett has often said, "It is better to buy a great company at a fair price than a fair company at a great price."
I will continue to watch WFC closely and next time it takes a dip I may not be in a quibbling mood over a buck one way or the other when I am looking for a long-term hold. There is always the possibility that Wells Fargo could end up merging with another bank that would allow them to tie the coasts together. That might add some additional value too. Given that the overall stock market has been moving upward for a long stretch, WFC might also be a good defensive stock to own. The 52-week range was $31.54 to $36.99. It closed today at $35.76.
Check out my other posts for BloggingStocks here.
Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.
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Reader Comments (Page 1 of 1)
2-19-2007 @ 8:47AM
egh said...
Do not wait for a dip, buy the stock now. I used to be an employee from 1978-1986. I have held on to over 200 shares when Ileft and now own over 2,000 share from splits and add'l buys. Great dividend good management. when looking at banks....look at the roi and roe and how they contain costs. i left the bank because they contain cost too well. Buy th estock and sit for th enext ten years and get rich
2-17-2007 @ 6:34PM
Mr. noitall said...
I don't know what Wells Fargo's policy is on offering credit to non-citizens, but I'm very impressed with Bank of America's decision to offer credit cards to illegal immigrants. This shows me that they are thinking forward and are true innovators. Other banks won't even offer credit to legal immigrants. By doing so, they are ignoring a huge amount of potential customers.
2-20-2007 @ 10:19PM
HJ said...
Wells Fargo is innovative as it has set agreements with Banks in the Phillipines, Bank of Mexico and is looking at other relationship banking to help immigrant workers here in the states.
People here who want to send money home simply set up an account with WFC and when cash is deposited today it comes out of an ATM machine in Mexico City tommorrow. Wells collects a fee for every transaction.
2-18-2007 @ 11:31PM
Mr. noitall said...
Thanks for the info, HJ. It's good to see that some banks like Wells Fargo and Bank of America understand that the immigrants here are part of this country's link to the global economy. Gaining the trust of immigrants here and helping to improve the standard of living for their families in other countries is not only a good business move but also something that I would describe as being truly socially responsible. Other banks should take notice and start implementing their own programs or be left behind.