5 Most Undervalued Financial Stocks To Buy According To Hedge Funds

3. Wells Fargo & Company (NYSE:WFC)

Number of Hedge Fund Holders: 87

With a PE ratio of 14.7 as of February 22, Wells Fargo & Company (NYSE:WFC) is a notable financial stock that looks undervalued. Wells Fargo & Company (NYSE:WFC) saw a sharp spike in hedge fund sentiment during the last quarter of 2022, as 87 hedge funds reported owning stakes in the company at the end of the period, compared to 77 hedge funds in the previous quarter. The total value of these hedge funds’ stakes was over $5.5 billion. The biggest stakeholder of Wells Fargo & Company (NYSE:WFC) during this period was Boykin Curry’s Eagle Capital Management which owns a stake worth over $1.1 billion in the company.

Wells Fargo & Company (NYSE:WFC) CFO Mike Santomassimo recently said at a conference that “it’s going to get worse” in 2023. He was pointing to persistent inflation, tight labor market and a slowing housing market. However, the executive said that consumer spending remains healthy, driven by travel and entertainment.

Here is what Oakmark Funds specifically said about Wells Fargo & Company (NYSE:WFC) in its Q3 2022 investor letter:

“Wells Fargo & Company (NYSE:WFC) has been a long-time holding in the Oakmark Fund. Despite the positives of higher interest rates and the company making good progress on reducing expenses and regulatory consent orders, Wells Fargo shares have fallen one-third from their highs earlier this year to roughly 6.5x our estimate of normalized earnings power, and the stock ended the quarter at ~1x next year’s tangible book value. We find this is far too cheap for a strong banking franchise capable of tangible returns in the low-to-mid teens across business cycles.”