The stock market was down today and the financial sector was hit as hard as anything else. These are the days you want to have your watch-list ready or perhaps your stock alerts triggered. I have been watching Wells Fargo (NYSE: WFC) for quite some time. Today at $27.00 I received an alert and decided to buy some.
As a value investor I am seeking not to just make a profit but to have as large a margin of safety as possible. That means I do not want to just buy a discounted stock but I want to "steal it". Patience is always in order, and usually is rewarded. That was the case when we watched Tiffany & Co. (NYSE: TIF) go from the low $40's to $57 per share and think we had missed the train, only to keep our eyes open as it fell back down to $36 where we pulled the trigger.
Last week TIF did us proud (see: Chasing Value: Tiffany's -- all that glitters) and although I am wrong way too often, I would be greatly surprised to see TIF anywhere near $36 ever again. It has reached $50 since we purchased it in April. The following chart illustrates the recent path of Wells Fargo.
At $27 a share we have acquired a solid company at far below its five year average. We got it near its five year bottom. A stock that was on sale because others reported bad news:
- Lehman Bros. (LEH) gets triple-whammy of bad news
- Before getting fired, Wachovia CEO Thompson got gobs of money
- S&P cuts investment bank ratings
Wells is paying a 4.5% dividend yield and all my regular readers know how I like dividend paying stocks! There have been rumors that "my pal Warren", Buffett that is, of Berkshire Hathaway (NYSE: BRK.B) has been buying more and also that he has been selling. Right now I haven't the foggiest idea, but there has been no conversation about Wells cutting it's dividend, or management problems, or hidden sub-prime losses so I am comfortable. That does not mean I will not be ever watchful because I have been burned before. However, from what I can glean this was a safe bet and I am in good company.
Wells Fargo closed today at $27.11 scooping me up and leaving me with a small profit for the day. Where will it be tomorrow? I do not know, but today it was a buy.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of WFC, TIF and BRK.B.
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Reader Comments (Page 1 of 1)
6-03-2008 @ 11:46AM
Wayne said...
Bear Stearns imploded on their reckless investment in subprime mortgages. Now, as part of JP Morgan Chase they are well on their way to imploding their new company as well. Plymouth Park Tax Services aka Xspand aka... a subsidiary of Bear Stearns is in the midst of spending multiple BILLIONS of dollars on tax liens in multiple florida counties. If you think subprime mortgages were risky you should study up on tax liens.....no less in the most depressed real estate market in the country. This is a competetive business and Bear/Chase is using their new found free money from the fed to buy GARBAGE just to generate fees. If anyone is truly concerned please look into it. They are buying under PPTS and are well in the $1 billion + range. The collateral is C- at best. So......who is going to bail out JP Morgan Chase???