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General Investing

Wells Fargo & Co. (WFC) Trades Inexpensively Relative to Management Quality and Macroeconomic Outlook

April 22, 2013

Wells Fargo & Co. (WFC) trades inexpensively relative to the quality of its management, especially as the banking industry’s performance is improving along with macroeconomic indicators, and the stock is expected to rise and eventually reflect the intrinsic value of the company, says François Rochon, President and Portfolio Manager of Giverny Capital.

“We think these are top guys, and one of the reasons that we were able to purchase them at very attractive level is because investors in general were very pessimistic about this industry. They are now a little less pessimistic than a few years ago, but the industry is doing much better. The real estate market is doing a little better. So anything linked to mortgages should do better going forward,” Rochon said.

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Rochon says the future looks promising for Wells Fargo as investors realize the true value of the bank and return to invest in levels that are more reflective of the company’s merits.

Wells Fargo has done pretty well lately, but we think the next five years looks even more promising. It’s strange, you never know exactly when or why Wall Street will come back into it, but I am reassured by the fact that in the long run, the stock market always reflects the intrinsic value of the businesses. You don’t know exactly what the timing will be, but in the end, if we’re right about the company, we’ll be right about the stock,” Rochon said.


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