Wells Fargo Update | $WFC

"There is general agreement among researchers that nearly all stock pickers, whether they know it or not – and few of them do – are playing a game of chance." -Daniel Kahneman

Two years ago we wrote the following about Wells Fargo (Symbol: WFC) when we recommended the shares for purchase:

Let’s review why we think Wells Fargo shares are attractive for purchase in the low-to-mid $40s price range:

• WFC trades at a forward P/E of 9, or slightly lower than its peers. The combination of higher earnings per share and a higher multiple are tailwinds to the stock price.

• WFC increased its dividend twice since our original recommendation, and we expect additional dividend payout increases in the future.

• WFC is buying back stock through repurchases at a rapid pace. WFC “repurchased $6 billion of common stock in the first quarter, bringing our total repurchases since the third quarter of 2021 to $18.3 billion”.

Here is a Wells Fargo stock chart since our most recent 2022 recommendation:

Wells Fargo’s quarterly dividend has continued to grow, as we expected:

At the time of our positive recommendation, Wells Fargo's stock was selling off due to concerns about an economic recession. Fast-forward two years, and Wells Fargo’s share price has risen significantly. Wells Fargo recently reported that its first-quarter earnings show ongoing improvement. The stock’s forward P/E ratio has risen to 11 from 9 two years ago.

The next catalyst for Wells Fargo stock will be the removal of the Federal Reserve’s $1.95 trillion asset cap on the company. Recent reports indicate the Fed is unlikely to take any action this year. Although some additional upside in Wells Fargo’s share price is possible, the exceptional opportunity we highlighted when WFC traded around $40/share has now been realized.