Morgan Stanley’s Best Overweight & Quality Stocks: Top 25 Stocks

10. Wells Fargo & Company (NYSE:WFC)

Number of Hedge Fund Holders In Q2 2024: 83

Average Analyst EPS % Revision: 0.8%

Wells Fargo & Company (NYSE:WFC) is one of the biggest banks in the US. While other diversified banks have global exposure, WFC is known for its strong presence in the US domestic market. This is evidenced by the fact that $14.1 billion of Wells Fargo & Company (NYSE:WFC)’s $24.1 billion of H1 2024 net interest income comes via retail banking. Like other sizeable banks, it also benefits from interest rate cuts. This is because lower rates reduce interest expense, and it has already been reflected in Wells Fargo & Company (NYSE:WFC)’s Q3 guidance. The firm increased its net interest income guidance drop to a low end of 8% from an earlier 7% for the full year and the need for lower rates was also reflected in the bank’s shares gaining 3.7% during the remaining week after the Fed announced its highly anticipated 50 basis point interest rate cut. However, Wells Fargo & Company (NYSE:WFC)’s shares have been flat since then after regulators restricted its ability to do business after determining weak money laundering controls. The bank also has a sizeable investment division, which could see tailwinds in a low rate environment provided the economy remains robust.

Wells Fargo & Company (NYSE:WFC)’s management commented on its investment arm during the Q2 2024 earnings call:

“We have been methodically growing our corporate investment bank, which has been a priority and continues to be a significant opportunity for us. We are executing on a multi-year investment plan while maintaining our strong risk discipline and our positive momentum continues. We have added significant talent over the past several years and we’ll continue to do so in targeted areas where we see opportunities for growth. Fernando Rivas recently joined Wells Fargo as Co-CEO of Corporate Investment Banking. Fernando has deep knowledge of our industry and his background and skills complement the terrific team Jon Weiss has put together. While we view our work here as a long-term commitment, we expect to see results in the short and medium term and are encouraged by the improved performance we’ve already seen with strong growth in investment banking fees during the first half of the year.

In our Wealth and Investment Management business, we have substantially improved advisor retention and have increased the focus on serving independent advisers and our consumer banking clients, which should ultimately help drive growth. In the commercial Bank, we are focused on growing our treasury management business, adding bankers to cover segments where we are underpenetrated, and delivering our investment banking and markets capabilities to clients and believe we have significant opportunities in the years ahead.”