Whats our view of Wells Fargo
“Hi James I was wondering what your thoughts are on another disappointing result by Wells Fargo. Is it time to let it go or is this a long term turnaround situation.” – Geoffrey S.
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Answer
Morning Geoffrey,
Wells Fargo (WFC US) is a bit like Australia’s Telstra (TLS) i.e. a frustrating serial disappointment – this one has frustrated both ourselves and Warren Buffett. As you suggest they released their quarterly update on Friday night and it was weaker than expected, largely around the amount of costs being stripped out by new CEO Charlie Scharf. While they reported a 5.2% reduction in expenses, the market was looking for about twice that amount and as a consequence, the stock was sold off.
We didn’t average our holding in the low $US20’s because the signs of a corporate turnaround were limited and bouncing ~75% investors will need to see some performance being delivered to send the stock up towards $40 however we do feel its in an attractive sector for 2021 and WFC is a cheap turnaround story within it, so at this stage we will give our holding a little rope, for now
MM is neutral WFC short-term.
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