We recently published a list of 10 Most Profitable Value Stocks to Buy Now. In this article, we are going to take a look at where Wells Fargo & Company (NYSE:WFC) stands against other profitable value stocks to buy now.
Matt Powers, Managing Partner at Powers Advisory Group, joined the discussion on CNBC’s ‘Power Lunch’ on March 11 to provide insights into the shift from growth to value investing and the resurgence of traditional dividend strategies. Powers emphasized that this transition has become increasingly evident, particularly following last week’s market activity and the events of March 10. He noted that while the market behavior on March 11 might tell a slightly different story, the broader trend is unmistakable. For years, growth stocks dominated portfolios, but now investors are gravitating toward value and dividend investing, which had been largely overlooked for over a decade. Powers attributed this shift to various catalysts, which included tariffs and policy uncertainty from Washington and President Trump’s unpredictable stances. He described investors as exhausted, and welcomed the normalization of equity markets and a return to diversification and traditional investing.
Powers highlighted the importance of diversification, contrasting high-growth portfolios with those focused on dividends. He pointed out that ETFs have outperformed large-cap growth funds year-to-date, with a notable 11-point difference in returns. The dividend fund is up 5%, while the large-cap growth fund is down 6%. He explained that tech stocks dominate large-cap growth funds and account for nearly half of their portfolios. In contrast, dividend-focused funds are more diversified across sectors such as healthcare, financials, and staples. This diversification reduces concentration risk and provides defensive characteristics in an uncertain market environment. Powers elaborated on the leadership shift between these two types of funds. While growth ETFs feature holdings like the MAG7, dividend ETFs focus on blue-chip companies. A year ago, growth stocks were investor favorites, but now value stocks are taking the lead, which is a trend reflected in their performance. He stressed the importance of broadening diversification within portfolios and not ignoring value opportunities.
Methodology
We sifted through the Finviz stock screener to compile a list of the top stocks with a forward P/E ratio under 15. We then selected the 10 stocks with a TTM net income greater than $1 billion and that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024.
Note: All data was recorded on March 13.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An investment banker making a presentation to a board of directors about emerging markets.
Wells Fargo & Company (NYSE:WFC)
TTM Net Income as of March 13: $19.722 billion
Forward P/E Ratio as of March 13: 11.89
Number of Hedge Fund Holders: 96
Wells Fargo & Company (NYSE:WFC) provides financial services globally through banking, investment, mortgage, and finance products. It operates through four key segments: Consumer Banking & Lending, Commercial Banking, Corporate & Investment Banking, and Wealth & Investment Management.
The company’s credit card division expanded in 2024. The company opened over 2.4 million new credit card accounts. Credit card spending surged by more than $17 billion compared to the previous year. The company launched 11 new card products since 2021, which reflected the dedication to product development. This resulted in a 3% revenue increase year-over-year, which was driven by higher loan balances and increased spending.
Wells Fargo & Co. (NYSE:WFC) has maintained strong credit standards during this growth. While average loans declined throughout most of the bank, credit card balances increased. The company will now continue to monitor the credit card portfolio, and improve its digital capabilities, marketing efforts, fraud capabilities, and private decisioning.
Oakmark Fund highlighted the company’s strong Q3 2024 earnings, efficient cost management, share repurchases, and positive market sentiment to reinforce the fund’s belief in the company’s competitive advantage and value potential. It stated the following regarding Wells Fargo & Co. (NYSE:WFC) in its Q4 2024 investor letter:
“Wells Fargo & Company (NYSE:WFC) was the top contributor during the quarter. The U.S.-headquartered diversified bank’s stock price rose after reporting what we see as solid third-quarter earnings where the company’s efficiency ratio continued to improve as expenses were well controlled. The fee income segment also performed well, growing 12%. In addition, Wells Fargo had the opportunity to repurchase $3.5 billion in shares during the period, bringing the full-year repurchase to roughly $16 billion. In November, the stock price continued its upward trend following the U.S. presidential election as investors are optimistic that the financials sector will benefit from looser regulations and lower corporate taxes, thus stimulating a better environment for dealmaking. We continue to believe that Wells Fargo is a competitively advantaged bank that can use its superior business mix and return potential to unlock further value.”
Overall, WFC ranks 5th on our list of the most profitable value stocks to buy now. While we acknowledge the growth potential of WFC as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WFC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.