Investment management firm, Davis Advisers, released its “Davis New York Venture Fund” 2022 annual investor letter. A copy of the same can be downloaded here. The fund’s portfolio of durable companies trades at 9.8 times forward earnings now compared to 17.8 times for the S&P 500 Index. The firm believes that holdings of the fund have significant earnings prospects in the years ahead. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Davis New York Venture Fund highlighted stocks like Wells Fargo & Company (NYSE:WFC) in the 2022 annual investor letter. Headquartered in San Francisco, California, Wells Fargo & Company (NYSE:WFC) is a financial services company. On March 20, 2023, Wells Fargo & Company (NYSE:WFC) stock closed at $37.48 per share. One-month return of Wells Fargo & Company (NYSE:WFC) was -21.08%, and its shares lost 26.71% of their value over the last 52 weeks. Wells Fargo & Company (NYSE:WFC) has a market capitalization of $141.565 billion.
Davis New York Venture Fund made the following comment about Wells Fargo & Company (NYSE:WFC) in its 2022 annual investor letter:
“Our investment thesis for our next largest bank investment, Wells Fargo, is totally different. As is well known, Wells Fargo & Company (NYSE:WFC) is the country’s third-largest bank, serving one in three U.S. households. Years of regulatory missteps under prior managements resulted in reputational damage, higher-than-average expenses, numerous consent orders, caps on asset growth, all added to the negative impact of low rates on their interest income. However, where others see bad news, we see resiliency and gradual improvement. Wells Fargo’s resiliency is reflected in the fact that despite years of terrible headlines and congressional hearings, Wells Fargo’s core customers stayed put and customer attrition remains extraordinarily low.
As to gradual improvement, new management has made steady headway in closing consent orders, settling regulatory matters and upgrading systems. Thus, rather than increasing profits from growth, Wells Fargo’s earnings growth for the next three-to-five years should come from the combined tailwinds of rising interest income, partially offset by normalizing credit costs, reduced expenses as systems improve and the scandals of the last decade are gradually put behind them, and the return of excess capital through share repurchases and rising dividends. The hypothetical earnings bridge displayed in Figure 6 gives some sense of the earnings power we see unfolding in the years ahead for this durable financial franchise.
While our grounded optimism carries the day, we are mindful of the risk that Wells Fargo’s historically excellent credit culture may have deteriorated, or that exasperated regulators may choose to extract even more major penalties for past infractions.”
Wells Fargo & Company (NYSE:WFC) is in 30th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 87 hedge fund portfolios held Wells Fargo & Company (NYSE:WFC) at the end of the fourth quarter which was 77 in the previous quarter.
We discussed Wells Fargo & Company (NYSE:WFC) in another article and shared the list of best bank dividend stocks to buy. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
