Should I Buy Wells Fargo (WFC)? Finance YouTuber Analysis

The YouTuber argues that Waterstone Financial is an undervalued regional bank with a mortgage origination division that the market currently values at zero. He highlights that the mortgage segment's performance is improving significantly, with recent quarterly earnings matching previous annual figures, and the bank's overall profitability is strong. The company also actively repurchases shares and pays a dividend, making it attractive at its current low valuation of 7-8x normalized earnings compared to peers.

“La compañía que vamos a ver es Waterstone Mortgage, ¿vale? Que se en bolsa cotiza como Waterstone Financial. A diferencia de otras compañías, podemos ver que desde estos mínimos que ha estado bajando, pues apenas eh se ha se ha recuperado.”

The YouTuber suggests Wells Fargo is a good long-term investment, citing its status as a classic bank model with a strong brand and customer base, consistent dividends, and a healthy financial position. He notes that while the P/E ratio is higher than its historical average, Peter Lynch's PEG ratio suggests it's an interesting value, and Charlie Munger held it for many years. The bank is expected to benefit from future interest rate cuts, which will reactivate credit and loan growth.

“Pero si vamos a a 15, 20 años, 25, pues es un banco sólido, de los mejores de Estados Unidos, una gestión bastante prudente y creo que que no es mal momento de entrada si si vamos a largo plazo.”

The YouTuber finds Wells Fargo particularly attractive among bank stocks, citing its higher 2% dividend yield and the recent resolution of its regulatory problems. This comes after the Federal Reserve's stress test results cleared banks for larger dividend payouts, making the sector more appealing.

“Wells Fargo looks particularly attractive here with a higher 2% dividend and recent wrap-up of its other regulatory problems.”

The analyst is adding Wells Fargo back to his portfolio, citing its increased dividend after the stress test results and its current valuation at 0.95 times price-to-book, which is a 10-year low and a 20% discount from its five-year average. He also notes its position as the third-largest bank by deposits, which will benefit from rising interest rates, and the potential catalyst of the asset cap being lifted next year.

“I'm adding it back to the portfolio after the shares have come back down. Wells Fargo increased its dividend 20% after the stress test results boosting the quarterly payout to 30 cents a share and the yield to 3% a year.”

The YouTuber uses Wells Fargo as an example of a company to sell or avoid due to major scandals and a lack of accountability from management. He explains that the company's failure to address issues like unauthorized accounts led to a 'dead stock' for years, highlighting that bad management can significantly harm a portfolio.

“this is what happened at wells fargo it was discovered in 2016 that service reps had been creating unauthorized accounts and credit applications to boost their sales numbers management knew about it and did nothing and even after the report it took months for management to take responsibility and then make those changes to the corporate culture that lack of responsibility cost shareholders with a dead stock for years”

Hogue likes Wells Fargo shares, stating that bank stocks benefit from rising interest rates because they can earn more on loans while keeping savings rates low. He highlights that bank stocks can protect a portfolio if higher interest rates negatively impact tech stocks.

“And here in this group I still like shares of Wells Fargo ticker WFC as well as Huntington Bank shares ticker HBA.”

The YouTuber believes Wells Fargo will benefit from general tailwinds for bank stocks and could see a significant jump as it resolves issues with federal regulations. He suggests the dividend could return to previous levels, attracting investors.

“wells fargo ticker wfc is set to benefit for all those reasons that are going to help bank stocks in general but also could jump as it works its way out from under a lot of those fed rules put in place over the last few years”

The analyst recommends buying Wells Fargo stock, citing its current undervaluation relative to its book value and net income yield, which suggests a potential 14% internal rate of return over the long term. He believes the bank is fundamentally sound despite past issues, with strong asset growth, share buybacks, and a conservative lending approach. The analyst expects the stock to revert to its historical multiples as the bank resolves its regulatory issues and the effects of COVID-19 subside.

“I think overall this is reflecting a decent return for an investment on a very conservative bank.”