10 Best Blue Chip Stocks Under $100

4) Wells Fargo & Company (NYSE:WFC)

Share Price as of August 16, 2024: US$55.33

Average Upside Potential: 17.48%

Wells Fargo & Company (NYSE:WFC) is one of the leading banks in the United States, which is split into 4 segments. These include consumer banking, commercial banking, corporate and investment banking, and wealth and investment management.

Wells Fargo & Company (NYSE:WFC)’s wide economic moat stems from the cost advantages and customer switching costs in the core banking operations, and intangible assets in wealth management. Its funding costs continue to act as a key source of advantage. It attempts to increase switching costs by deepening relationships through multiple products and by offering acceptable customer service.

Out of its tangible assets, ~20% are financed by deposits that have no interest expense. It also has a strong and dense branch network, enabling the lender to maintain the top share in one-third of its markets. The company increased its deposit market share to ~10% or more in 21 states. Apart from these advantages, the focus on cross-selling allows it to build tight relationships with customers rather than one-off transactions. Apart from producing sticky deposits, this practice leads to more productive assets.

The investments it has been making allowed it to take advantage of the market activity during 2Q 2024, with healthy performance in investment advisory, trading, and investment banking fees. Wells Fargo & Company (NYSE:WFC) is expected to see improvement in its net interest income once the US Fed starts cutting interest rates. The bank should see some improvement in the loan demand.

The much-anticipated Fed rate cuts should help Wells Fargo & Company (NYSE:WFC) in reducing their deposit costs while minimizing the risk of credit losses. According to Insider Monkey, 73 hedge funds out of 920 tracked held stakes in Wells Fargo & Company (NYSE:WFC) as of the end of Q1 2024.

ClearBridge Investments, an investment management company, released its fourth quarter 2023 investor letter and mentioned Wells Fargo & Company (NYSE:WFC). Here is what the fund said:

 “Stock selection in the financials sector proved to be the largest contributor to relative outperformance. Banking stocks such as Wells Fargo & Company (NYSE:WFC) saw their share price rise during the quarter as investors anticipated Fed rate cuts that would reduce deposit costs while retaining economic strength and minimizing the risk of credit losses.”