After hitting a one-year high of $37.99 in September, the stock hit a one-year low of $24.38 in January. This morning, WFC opened at $29.64. So far today the stock has hit a low of $28.61 and a high of $29.65. As of 12:05, WFC is trading at $28.71, down 89 cents(-3.0%). The chart for WFC looks neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a July bear-call credit spread above the $32.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in nine weeks as long as WFC is below $32.50 at July expiration. Wells Fargo would have to rise by more than 12% before we would start to lose money. Learn more about this type of trade here.
WFC hasn't been above $32.50 since February and has shown resistance around $30 recently. This trade could be risky if the flagging US economy turns around quickly, but even if that happens, this position could be protected by resistance WFC might find at its 200 day moving average, which is currently around $32 and falling.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in WFC or BRK.A.
The model portfolio of Insiders Plus gains 48% last year; here, editor Jack Adamo reviews two of his portfolio holdings -- both bank stocks being accumulated by Warren Buffett's Berkshire Hathaway.
"U.S. Bancorp (NYSE: USB) reported a slight decrease in Q1 earnings of 62¢ per share versus 63¢ last year; the shares rose 2.8% the next day. Compared to the disastrous results of its peers, this small decline in earnings was a home run.
"That's a testament to the company's savvy managers. USB steered clear of the toxic problems that choked most banks. Only 2.7% of its loans are subprime.
"Warren Buffett's Berkshire-Hathaway continues to buy the stock steadily. Recent SEC filings show that in the fourth quarter of 2007 Berkshire increased its share of the Minneapolis-based bank by 3 million shares to a total of 75 million.
"This represents 4.4% of its shares outstanding, and up tremendously from its stake of 23 million shares just a few years ago. The Wizard of Omaha knows what he likes and why he likes it.
"Meanwhile, Wells Fargo & Company (NYSE: WFC) reported Q1 earnings of 60¢ per share down 9% year-over-year, but up 46% from the December quarter. Like USB, Fargo shares continue to be accumulated at Berkshire Hathaway.
"The stock is a solid long-term buy, with good prospects of steadily raising its 4.2% dividend. It has capital appreciation potential to boot, especially after the housing hangover abates."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
JP Morgan Chase (NYSE: JPM) May option implied volatility of 33 is below its 26-week average of 38 according to Track Data, suggesting decreasing price movement.
Wells Fargo (NYSE: WFC) May option implied volatility of 33 is below a level of 52 from April 14 and below its 26-week average of 40, suggesting decreasing price movement.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
MOST NOTEWORTHY: GFI Group, Wells Fargo and Cirrus Logic were today's noteworthy downgrades:
Goldman downgraded GFI Group Inc (NASDAQ: GFIG) to Neutral from Buy following the company's announcement that credit chief, Donal Fewer, left the company to go to a rival firm and that about two dozen brokers may defect to follow him.
Oppenheimer cut Wells Fargo & Company (NYSE: WFC) to Underperform from Perform as they believe the company is under-reserved by at least $4.5B and that there is significant room for multiple contraction.
Cirrus Logic Inc (NASDAQ: CRUS) was downgraded at Jefferies to Hold from Buy on valuation, as they believe the risk/reward is no longer favorable at current levels.
TheStreet.com's Jim Cramer says the good stuff out there -- and there's a lot of it -- will keep us going up.
How high can we go? That's pretty much the only question worth asking after you put in a bottom, as we did after the Bear Stearns (NYSE: BSC) (Cramer's Take) collapse.
Nobody's talking about a new bull market. But let me give you some thoughts about what has happened in the past few weeks to make it so that you could become more positive.
First, we went down so much because the systemic risk in the biggest part of the S&P, the financials, was overwhelming. It is why we "overcorrected" because the market feared -- and shorts pressed their bets -- that the following institutions could go under: Bear Stearns, Washington Mutual (WM) (Cramer's Take), Wachovia (WB) (Cramer's Take) -- yes, Wachovia, because of the miserable buy of what turned out to be a really reckless lender, Golden West -- Lehman Brothers (LEH) (Cramer's Take), Merrill Lynch (MER) (Cramer's Take), Citigroup (C) (Cramer's Take), National City (NCC) (Cramer's Take), Capital One (COF) (Cramer's Take) and even Wells Fargo (WFC) (Cramer's Take). Fannie (FNM) (Cramer's Take) and Freddie (FRE) (Cramer's Take), too.
Oppenheimer downgraded Wells Fargo (NYSE:WFC) from "perform" to "under-perform" according toBriefing.com. The financial news service also reports that Soleil upgraded Ford (NYSE:F) from "sell" to "buy".
Credit Suisse writes that it expects Hanesbrands (NYSE:HBI) to post strong earnings for the last quarter, according to the AP.
Douglas A. McIntyre is an editor at 247wallst.com.
While bank stocks aren't exactly hot, they triggered yesterday's rally because when J.P. Morgan Chase & Co (NYSE: JPM) and Wells Fargo & Company (NYSE: WFC) reported, there were no unexpected surprises, according to the Wall Street Journal's "Heard on the Street". The ups and downs in the sector are expected to continue.
According to people familiar with the matter, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) may be moving closer to outsourcing its search advertising to Google Inc (NASDAQ: GOOG) after an initial test yielded what they considered to be positive results.
OTHER PAPERS:
The New York Times reported that AT&T Inc (NYSE: T) is planning today to make an announcement that they will gift $100M to improve the skills of the nation's work force and fight the problem of high school dropouts.
WEB SITES:
Celgene Corporation (NASDAQ: CELG) is best known for its blockbuster drug Revlimid which is used treat multiple myeloma, a cancer which attacks blood and bones. For patients, it can prolong their lives about 2.9 years, or longer, according to Investor's Business Daily's "The New America".
There's nothing quite like the earnings game on Wall Street. And two big banks -- JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) both played it very well. Despite falling earnings, investors are celebrating. And that's because JPMorgan and Wells both beat analysts' expectations.
Bloomberg News reports that Wells earned 11% less than last year -- $2 billion, or 60 cents per share -- 5.3% more than the 57 cents that analysts had expected. Wells took in $334 million from its stake in Visa Inc. (NYSE: V) IPO, but it also benefited from a tight credit culture and an aggressive sales force. Nevertheless, its charge-offs for bad credit card and automobile loans were up 26% -- a sign of trouble in consumer loan land.
Meanwhile, AP reports that JPMorgan beat analysts' expectations by 6.3% despite a 50% decline in its net income. Specifically, JPMorgan profit fell in the first quarter to $2.37 billion after it took a provision of $5.1 billion to strengthen its reserves by $2.5 billion and account for $2.6 billion in losses in its loan portfolio. JPMorgan made 68 cents per share compared with $4.79 billion, or $1.34 per share, a year earlier. That was 4 cents more than the 64 cents that analysts expected.
Analysts surveyed by Thomson Financial expect JP Morgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) to post smaller profits in the first quarter. Both banks are scheduled to report results on Wednesday.
JP Morgan is expected to earn 65 cents per share, which is down 51% from the same period in 2007 when it earned $1.34. The company has tended to beat quarterly estimates recently. However, it fell short of the consensus fourth-quarter 2007 estimate by six cents, or 6.8%.
New York-based JP Morgan is the third largest financial services firm in the U.S, behind Citigroup (NYSE: C) and Bank of America (NYSE: BAC), and recently agreed to buy Bear Stearns (NYSE: BSC). In the past year, JP Morgan's revenues were $116.3 billion and its net income totaled $15.3 billion. Its EPS growth forecast for the year is -23.4%, much worse than the banking industry average and the S&P 500. Yet the consensus recommendation of analysts is to buy JPM and has been for most of the past three months.
The stock has fallen 15.5% in the past year and trades at a P/E of 9.47. Shares closed Monday at $41.50.
Investment Quality Trends -- one of the most respected newsletters in the advisory field -- uses a proprietary strategy that assesses historic level of stock price to yield; it's goal is to buy those stocks offering the best potential for downside protection and upside appreciation.
Here, editor Kelley Wright explains his methodology and highlights his current "Timely Ten" stocks that best match his time-tested criteria.
"Investors who wished to hold every stock in that we currently rank in the 'Undervalued and Rising Trend' categories, would need to hold one hundred twenty six stocks as of March; clearly too many positions to be practical.
"Our Timely Ten, therefore, is our reasoned expectation based on our methodology and experience for what we believe will perform best over the next five years.
"Do we believe that all 10 will go up simultaneously or immediately? Of course not. Our four decades of research and experience, however, leads us to believe that these stocks, purchased at current Undervalued levels, are well positioned for appreciation.
The quarter has hardly begun and, with analysts and investors watching nervously, the earnings crunch is about to begin anew. The following 11 big banks are among companies reporting results the week of April 14 to April 18.
These three are expected by analysts surveyed by Thomson Financial to be the the top performers in the first quarter, based on earnings growth from the same period of last year:
MOST NOTEWORTHY: Apple, Novartis and Infineon were today's noteworthy downgrades:
Morgan Keegan downgraded Apple (NASDAQ: AAPL) to Underperform from Market Perform citing increased evidence of broad-based weakness in consumer technology spending in the U.S. and Europe. Additionally, the firm expects challenges in the company's education vertical due to state and local budget issues, which could lead to decelerating growth over the next 2-3 quarters.
Bear Stearns downgraded Novartis(NYSE: NVS) to Peer Perform from Outperform following the acquisition of Alcon (NYSE: ACL), as they find the deal expensive.
Credit Suisse cut Infineon (NYSE: IFX) to Neutral from Outperform to reflect weakness in the U.S. dollar.
OTHER DOWNGRADES:
Goldman downgraded Wells Fargo (NYSE: WFC) and Zions Bancorp (ZION) to Neutral from Buy.
Keefe Bruyette cut Washington Mutual (NYSE: WM) to Underperform from Market Perform.
Baird downgraded Flowserve (NYSE: FLS) to Neutral from Outperform.
Nike (NYSE: NKE) unveiled its Olympics 2008 line Monday, its largest effort for the games ever. Nike actually created products in every sport at the games despite not being an official sponsor of the games like its rival Adidas. As for the U.S. team, it will be attired in Polo Ralph Lauren (NYSE: RL) garb.
If Apple Inc. (NASDAQ: AAPL) was upgraded Monday, today it finds itself on the flip side with a downgrade from Morgan Keegan from Market Perform to Underperform. Ummmm, contrarian is one thing, but I'm not so sure about that one. AAPL shares are down nearly 1.5% in premarket trading.
Meanwhile, according to MarketWatch, Goldman Sachs has upgraded some brokers and asset managers, but is remaining cautious on regional banks, mortgage and specialty finance and REITs. American Express (NYSE: AXP), Metlife (NYSE: MET), Bank of New York Mellon (NYSE: BK), NYSE Euronext (NYSE: NYX) and several others all were upgraded to Buy. Wells Fargo (NYSE: WFC) and several others were cut to neutral.
Morgan Stanley upgraded UBS (NYSE:UBS) from "underweight" to "equal weight" according toBriefing.com. The financial news service also reports that Morgan Keegan downgraded Apple (NASDAQ:AAPL) to "under perform" from "market perform".
Douglas A. McIntyre is an editor at 247wallst.com.
Wells Fargo (NYSE: WFC) shares are trading lower today after conflicting reports have surfaced as to Berkshire-Hathaway's (NYSE: BRK.A) recent actions regarding the company. The AP reports that Warren Buffett's brand disclosed a smaller stake in WFC, while Bloomberg is saying that Berkshire is increasing its Wells Fargo position. Personally, I'm not sure who to believe on this one, but the market is taking WFC lower so far today. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on WFC.
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TheStreet.com's Jim Cramer says the good stuff out there -- and there's a lot of it -- will keep us going up.
Here are some highlights from this past week's 
here's nothing quite like the earnings game on Wall Street. And two big banks -- 
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
