2. Wells Fargo & Company (NYSE:WFC)
Daily Journal’s Stake Value: $76,374,000
Percentage of Daily Journal’s 13F Portfolio: 29.52%
Number of Hedge Fund Holders: 88
Wells Fargo & Company (NYSE:WFC) is a California-based multinational financial services corporation, serving customers globally, with offices in 35 countries. Wells Fargo & Company (NYSE:WFC) operates via its subsidiary, Wells Fargo Bank, which is one of the Big Four American banking institutions.
Charlie Munger has reiterated his preference for Wells Fargo & Company (NYSE:WFC), calling it his “favorite” bank, and has consistently held his stake in the bank without selling any shares since 2017. Even though Warren Buffett got disenchanted with Wells Fargo & Company (NYSE:WFC) after its accounts scandal, Munger stated that the management was not malevolent intentionally and just gave in to short-term temptations, hence he was lenient with his decision to hold the shares. He owns a $76.3 million position in Wells Fargo & Company (NYSE:WFC), which represents 29.52% of total fourth quarter investments at Daily Journal.
Publishing its Q4 2021 financial results on January 14, Wells Fargo & Company (NYSE:WFC) announced earnings per share of $1.25, beating estimates by $0.25. Revenue over the period jumped 16.35% year-over-year to $20.86 billion, outperforming estimates by $2.19 billion. The stock gained 1.9% when Q4 results were publicly announced, as the above consensus figures reflect the company’s efforts to reduce expenses and increase lending.
Argus analyst Stephen Biggar on January 18 raised the price target on Wells Fargo & Company (NYSE:WFC) to $65 from $55 and kept a Buy rating on the shares after the Q4 earnings beat. The analyst noted that Wells Fargo & Company (NYSE:WFC) offered robust guidance for 2022, while its net charge-offs remained low in Q4.
Boykin Curry’s Eagle Capital Management is the largest Wells Fargo & Company (NYSE:WFC) shareholder as of Q3 2021, holding a $1.56 billion stake. Overall, 88 hedge funds were bullish on the stock in the third quarter.
Here is what Davis Global Fund has to say about Wells Fargo & Company (NYSE:WFC) in its Q3 2021 investor letter:
“…This second chart highlights that financials remain the cheapest part of the market today and continue to be extremely attractive. Strong capital ratios, conservative lending practices, already record low interest rates and now a strengthening economy, all paired with low valuations, bode well for future returns.
Take our top financials holding in Wells Fargo, for instance. Wells Fargo is trading at 1.3x tangible book value, while we expect return on equity (ROE) to be in the mid-to-high teens over time. Even in this low-rate environment, the current multiple is only 12x 2021 owner earnings, and our IRR estimate is 12–13%. Wells Fargo has performed well this year, up 51% year-to-date, yet still looks very attractive, which speaks to how undervalued it was and why it is so important to be patient when investing in high-quality companies trading at low valuations. Rather than invest on the basis of unpredictable near-term catalysts, we prefer to be patient as earnings and cash build up, even if the stock price does not immediately reflect the economic reality. We continue to like our positions in financials.”
