Chasing is the right word for this column. I have been following Wells Fargo (NYSE: WFC) for several years, I own the shares, having bought on dips and I have several accounts at the bank, but the recent chart on this stock is quite strange indeed. It was only last week I posted Chasing Value: Wells Fargo is getting weird when it was around $25 a share, but that was up from $21 a few days earlier and now it is trading about $32.50.The stock has traded under $20 and over $36 intraday, but not the same day. How can something trade so wildly unless there is rampant speculation. Warren Buffett owns the stock and has been buying more. Ken Heebner has been buying the stock lately too.
These guys are not day traders and I'm not either. Perhaps some segment of the market just cannot give up the profits on the high end and the volatility momentum has made it a good trade for Wall Streeters. I have been patient and buying on dips although not getting the steals I could have.
Here is a two month chart to illustrate what I am talking about..
These figures are closing numbers and intraday has been even more extreme. For a major financial institution that is supposedly well managed and sufficiently capitalized to survive the current economic pitfalls, a 50% deviation in such a short period of time gets back to that overused but very symbolic word "irrational". The stock is currently trading up about 8%.
Wells is still paying a 4.7% yield at today's price about 50% above the five year average. It seems to be maintaining a very high 15% profit margin on its trailing figures. Would I buy today, no. Will I buy if it dips again yes. My order is already in.
Good luck figuring this one out.
UPDATE: Final $32.66, up $2.72 or 9.08%
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 own shares of WFC
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