Wells Fargo (WFC)

Bank of America or Wells Fargo? Both are well-diversified and have interest rate sensitivity. BAC has better capital markets exposure, which he likes. Wells Fargo is in the doghouse with leadership, namely with regulatory problems. This hamstrings WF management. This is a big knock against them. Definitely prefers BAC.

A bank that he admired for many years, but it turned out they were doing some things they shouldn’t be doing. If you are a very long-term investor, you will do OK with this one, but he prefers other choices. (Analysts’ price target is $64.93)

Sell if you're under water. They got caught for unethical sales practices everywhere in their business and the Fed severely punished them. He sold it within days of the news. Instead, he owns Bank of America, Citibank and Morgan Stanley.

They’ve had issues with consumers, with people on the Board. The Fed has restricted them from growing assets and generally made it tough for Wells to grow.

US national banks all trade around 13x and have a yield of about 1.5. For WFC, you pay a bit more but get a higher dividend. If you are very yield focused, Wells Fargo is attractive, but if he was going to buy an American bank, he would pick Bank of America (BAC-N). He prefers its balance of commercial and investment banking versus retail banking. Between WFC and BAC, he prefers BAC but does not own either.

It was known as the “best run” bank. But Management has been complete morons in the last few years. Just smacked down by the Federal Reserve. But Wells Fargo always seem to recover. This is high times for the US Banks. Rising interest rates, tax reform. Banks are notorious for making mistakes but also for making tons of money. He owns J P Morgan and he wouldn’t sell to buy Wells Fargo. Still recommends buying it particularly if you don’t own any US Bank.

He likes banks. Wells Fargo has had problems with employees opening fake bank accounts and that has been That has been dogging the stock for a while. A good franchise. They are in every State. They continue to make small acquisitions. They are much more a retail commercial bank than an investment bank. That provides them earnings stability. Nice yield of 2.5%. 1.7 P/B relatively higher compared to other banks because of the ability of the company to generate good returns. Management made some mistakes but is doing good things in changing. Strong history on credit. Great organization.

(A Top Pick Dec 1/16. Up 23%.) The fake account scandal did weigh on them and their brand. There were a lot of extra costs around that, so earnings and BV have not grown at the same rate as others. He sold this 5 or 6 months ago.

(A Top Pick Nov 30/16, Up 8%) Tax reform is more important that Wall Street reform. He bought this when he got wind of the whole scandal of sales practices. He thought it was a good entry point. He uses the dip as an opportunity to buy more.

They were always credited for having a strong sales force but now we know why. Employees were getting threatened with job loss. Now there are no quotas in place and so they are not getting as many loans. He prefers other banking stocks.

A great example of “Where there’s smoke, there’s often fire”. They’ve had conflict of interests with sales practices, etc. Historically, they are now trading at a discount. The problem is, what originally started in the personal consumer bank, has now really bloomed out to some commercial practices and corporations. If it turns out this is really bank wide, you are dealing with a whole other can of worms. You always want a high-quality franchise such as Bank of America (BAC-N) or J.P. Morgan (JPM-N). (See Top Picks.)

(Market Call Minute.) There are better US banks to own. You aren’t going to get killed on this, but they are going to spend a little time over the next couple of years paying off a lot of lawsuits.

(A Top Pick Nov 30/16. Up 4%.) Bought this just prior to the Trump bump, but after they made the first announcement with respect to the deposit issue. He got a good price and a good dividend. The dividend will continue to grow. Trading at 1.2X Book, which is really, really cheap.

This is a little more sensitive to yield. Between J.P. Morgan (JPM-N) and this one, this is interesting, but there is hair on it from investment selling practices. Any time you come out from a “cease-and-desist”, it always takes a little while to get back to the former glory. The balance sheet is super sweet and clean so he wouldn’t worry about it if you are there.

Probably one of the more expensive banking retail stocks in the US. Good dividend yield. He likes this bank. There are some issues with the regulatory environment, simply because of what happened to them with some of their employees selling wrong products to clients. They have one of the best franchises coast-to-coast. Management has been very successful at creating shareholder value over long periods of time. They are going to take $2 billion in cost cutting by 2018, and another $2 billion in 2019. Cutting their branch networks by 450 branches.