rb Posted May 13, 2020 Share Posted May 13, 2020 Seriously WTF is happening to WFC. Doo, What did you do? Link to comment Share on other sites More sharing options...
DooDiligence Posted May 13, 2020 Share Posted May 13, 2020 Seriously WTF is happening to WFC. Doo, What did you do? Same thing I did to Altria. ??? Link to comment Share on other sites More sharing options...
Cevian Posted May 13, 2020 Share Posted May 13, 2020 The biggest problem I've had with banks is general is: can you honestly say you know what's on the balance sheet? The income statement always tends to look good until the day when they need to write-off the accumulated sh&t on the balance sheet. Then they start the process all over again. Link to comment Share on other sites More sharing options...
thepupil Posted May 13, 2020 Share Posted May 13, 2020 WFC market cap: $95 billion SHOP market cap: $90 billion in the past 4 years WFC has generated $111 billion of pre-tax income. no position in either security, but wow. Of course, one of this is a bank and the downside on a bank is always a lot, but I feel like FIRE (Finance Insurance Real Estate) is at 2009 valuation (albeit on peak fundamentals) and growth tech is approaching 1999 valuations (I would argue peak fundamentals too, but what do I know). It's an odd dichotomy. What do your tech company's 2030 earnings look like if you plug in a big corporate tax hike. it's not like tech is completely immune to risk of increased regulation and taxes; will PTON subscriptions fall in a depression? will people buy fewer $1000 iPhones?. much of tech is more or less immune to balance sheet risk though. Link to comment Share on other sites More sharing options...
Artha158 Posted May 13, 2020 Share Posted May 13, 2020 WFC market cap: $95 billion SHOP market cap: $90 billion in the past 4 years WFC has generated $111 billion of pre-tax income. no position in either security, but wow. Of course, one of this is a bank and the downside on a bank is always a lot, but I feel like FIRE (Finance Insurance Real Estate) is at 2009 valuation (albeit on peak fundamentals) and growth tech is approaching 1999 valuations (I would argue peak fundamentals too, but what do I know). It's an odd dichotomy. What do your tech company's 2030 earnings look like if you plug in a big corporate tax hike. it's not like tech is completely immune to risk of increased regulation and taxes; will PTON subscriptions fall in a depression? will people buy fewer $1000 iPhones?. much of tech is more or less immune to balance sheet risk though. +1 Link to comment Share on other sites More sharing options...
RadMan24 Posted May 13, 2020 Share Posted May 13, 2020 Honestly, would it be this low if Sloan was still running the show? You have the oil patch, commercial real estate, and consumer spending at risk. Add on the new CEO, the continued selling of Warren Buffett, I can see why investors would lose their confidence. Even though it trades well below book, going into an unknown crisis, would you take the discount given these uncertainties and unknown execution, or would you take the jockey at JPM or BAC? It's definitely getting interesting, at some point the price is worth it. Link to comment Share on other sites More sharing options...
DooDiligence Posted May 13, 2020 Share Posted May 13, 2020 WEB may have sold off but Munger hasn't? I'll bet Charlie is saying "I told you so..." regarding the airlines. It'd be sweet to hear the old curmudgeon say he added to WFC. Link to comment Share on other sites More sharing options...
txvalue Posted May 13, 2020 Share Posted May 13, 2020 I am fascinated by these perception swings of over the years, even in this great thread. In 2009 BAC was a zombie bank and WFC was the golden child and ten years later the perception has flipped. Anecdotally I opened a Wells account in 2008, partially because it was the "safest" of the large banks with the least problems. It had the amenities I was looking for and conveniently located branches to my office and home. I followed the stock, but didn't invest until this year, I still hold large % positions in AXP and BAC from 2009 that I have been adding to this week. I tend to agree with the prior post that the large US banks are more similar than most people believe, you want to invest when one of them has an issue and then consider selling when things return to normalcy and perception changes. I often wonder why something like Charter gets valued at a premium to Comcast because they have not sold as well across their footprint (for years & years), so there is room to grow. While WFC is punished despite having a similar opportunity with many levers to pull: decreasing branch count, streamlining IT to take out cost and headcount, lifting of the asset cap, huge compliance costs that will eventually come down etc. Link to comment Share on other sites More sharing options...
mcliu Posted May 13, 2020 Share Posted May 13, 2020 Just too much uncertainty. No one knows the extent of the losses. For the banks, in some ways this crisis is worse than 2008/2009 (broader impact, lower interest rates) but in some ways it is better (less derivatives, artificial demand reduction). WFC's book probably earns about $20B annually pre-tax pre-provision, maybe closer to $30B excl lawsuits and scandals. It's trading at $90B with $130B of tangible equity. So the market is discounting pretty big losses. The 5 years from 2008 to 2012, provisions were $70B. Link to comment Share on other sites More sharing options...
gurpaul88 Posted May 13, 2020 Share Posted May 13, 2020 anyone looking at leaps here? Link to comment Share on other sites More sharing options...
Castanza Posted May 13, 2020 Share Posted May 13, 2020 anyone looking at leaps here? Yeah for sure, can’t decide how far otm I want to go though. My SAVE leaps (which I'm still holding) left a bad taste in my mouth....other than GOOG I haven’t had good experiences . Link to comment Share on other sites More sharing options...
locatevalue Posted May 13, 2020 Share Posted May 13, 2020 Trading less than what it returned in last 4 years..i know its rare view investing but what the heck! Link to comment Share on other sites More sharing options...
Jurgis Posted May 13, 2020 Share Posted May 13, 2020 WFC market cap: $95 billion SHOP market cap: $90 billion Are you thinking a barbell strategy? no position in either security, but wow. I guess not. 8) Link to comment Share on other sites More sharing options...
Munger_Disciple Posted May 13, 2020 Share Posted May 13, 2020 WFC looks very tempting. But.... What if the interest rates stay at 0% for 5 years going forward as it happened in Japan & Europe? How would WFC or BAC perform under that scenario? Also what about the loan losses for the next 3 years? I am sure the reserves will go up significantly in the 2nd quarter. I have a difficult time predicting any sort of "normalized" earnings for the next 5 years. Link to comment Share on other sites More sharing options...
LC Posted May 13, 2020 Share Posted May 13, 2020 Another question. Someone must be selling in large quantities. May be that WB is fully exiting the position? Link to comment Share on other sites More sharing options...
sleepydragon Posted May 13, 2020 Share Posted May 13, 2020 Another question. Someone must be selling in large quantities. May be that WB is fully exiting the position? USB and other regionals are down a lot too Link to comment Share on other sites More sharing options...
Liberty Posted May 13, 2020 Share Posted May 13, 2020 Russo pretty much sold out of WFC in Q1: https://whalewisdom.com/filer/gardner-russo-gardner Link to comment Share on other sites More sharing options...
alwaysdrawing Posted May 13, 2020 Share Posted May 13, 2020 I am constantly surprised by the love for WFC....the king of the shitco banks. They can't grow by acquisition, they are in the govt eye for malfeasance, the Fed acting to save other businesses with low rates destroys their profitability. The business model is broken--WFC pays 0 on deposits and makes safe loans, but in a credit destroying event like the present there aren't many safe loans to make, their profitability is undermined by the Fed lowering rates (negating the value of their deposit base), and they have big credit losses to recognize on previous "safe" loans going bad. No idea why you would want to buy a bank in this environment, and WFC seems like the worst of the large banks. Wouldn't be surprised if Uncle Warren exits too Link to comment Share on other sites More sharing options...
blainehodder Posted May 13, 2020 Share Posted May 13, 2020 I am constantly surprised by the love for WFC....the king of the shitco banks. They can't grow by acquisition, they are in the govt eye for malfeasance, the Fed acting to save other businesses with low rates destroys their profitability. The business model is broken--WFC pays 0 on deposits and makes safe loans, but in a credit destroying event like the present there aren't many safe loans to make, their profitability is undermined by the Fed lowering rates (negating the value of their deposit base), and they have big credit losses to recognize on previous "safe" loans going bad. No idea why you would want to buy a bank in this environment, and WFC seems like the worst of the large banks. Wouldn't be surprised if Uncle Warren exits too I'm not long, but every asset has a price. Just saying things are bad is not a DCF of their cash flows. At what price do you consider it a buy? At what price is a company like Shopify a sell? No one seems to bother even trying to value companies anymore. People seem more focused on trend and how things are going today. Not saying that is right or wrong as a method of trading, just observation. For long term investments like those that Berkshire makes, the long term is all that matters. Link to comment Share on other sites More sharing options...
undervalued Posted May 13, 2020 Share Posted May 13, 2020 I think we'll find out soon what WB did last quarter, his 13F should come out this week or next. Link to comment Share on other sites More sharing options...
alwaysdrawing Posted May 13, 2020 Share Posted May 13, 2020 I am constantly surprised by the love for WFC....the king of the shitco banks. They can't grow by acquisition, they are in the govt eye for malfeasance, the Fed acting to save other businesses with low rates destroys their profitability. The business model is broken--WFC pays 0 on deposits and makes safe loans, but in a credit destroying event like the present there aren't many safe loans to make, their profitability is undermined by the Fed lowering rates (negating the value of their deposit base), and they have big credit losses to recognize on previous "safe" loans going bad. No idea why you would want to buy a bank in this environment, and WFC seems like the worst of the large banks. Wouldn't be surprised if Uncle Warren exits too I'm not long, but every asset has a price. Just saying things are bad is not a DCF of their cash flows. At what price do you consider it a buy? At what price is a company like Shopify a sell? No one seems to bother even trying to value companies anymore. People seem more focused on trend and how things are going today. Not saying that is right or wrong as a method of trading, just observation. For long term investments like those that Berkshire makes, the long term is all that matters. I would MAYBE buy WFC 75% lower. I don't buy melting ice cubes unless I'm sure to get my cash back out quickly. DCFs are just models of expected cash flows, if you aren't certain of the cash flows but are pretty sure they are going down, that's enough information not to buy. To use Buffett quotes...it's better to be generally right than precisely wrong...You also don't have to swing at every pitch. Shopify trades at an absolutely incredible Price/Sales. I haven't done work on it, but I would be a buyer if I felt like company could both continue to grow fast enough for the cash flows to provide an adequate return (perhaps 20% per annum). For SHOP, maybe if it fell by 80-90%? Trading at 50x TTM sales is....pretty wild. How could investors realistically get any return from SHOP if it doesn't grow huge very fast? To put it in Buffett terms, it's a trading sardine, not an eating sardine. Not a lot makes sense in this market for buyers IMO. I'm looking though. Link to comment Share on other sites More sharing options...
RadMan24 Posted May 13, 2020 Share Posted May 13, 2020 WFC looks very tempting. But.... What if the interest rates stay at 0% for 5 years going forward as it happened in Japan & Europe? How would WFC or BAC perform under that scenario? Also what about the loan losses for the next 3 years? I am sure the reserves will go up significantly in the 2nd quarter. I have a difficult time predicting any sort of "normalized" earnings for the next 5 years. Rates could stay at 0% and the curve can rise - banks made plenty of money at low rates in recent years. Wells Fargo is posting a dividend yield of close to 10%. Munger swooped in to buy WFC when it was around $8 or so dollars, a "no brain'r" What's that kind of price today? $15 - if you account for the growth in economy and customer base? Link to comment Share on other sites More sharing options...
cmlber Posted May 13, 2020 Share Posted May 13, 2020 I think we'll find out soon what WB did last quarter, his 13F should come out this week or next. We already know what WB did last quarter with regards to his bank holdings. The large holdings have market values as of 3/31 in the 10-Q, from that, it didn’t look like he was a seller. And he filed a late April 13G showing him buying more US Bank. Link to comment Share on other sites More sharing options...
CorpRaider Posted May 13, 2020 Share Posted May 13, 2020 Exactly Cmlber. Also comments to Serwer were status quo with long-term thesis (as noted recently on a certain blog). haha. Good point Radman, also euro banks been earning with negative/near rates for like half a decade (but with other huge disadvantages versus U.S. megabanks). RE: the LEAPS, I might look at that after they cut/suspend the dividend, preferably combined with some trend/momentum signal. Link to comment Share on other sites More sharing options...
mcliu Posted May 13, 2020 Share Posted May 13, 2020 I suspect WB selling WFC due to the massive changes that Scharf is making. He's trying to make it less decentralized and more like JPM. That will disrupt operations and hard to know if it'll come out better, so it made sense to sell some in $40/$50. But I would be surprised if he's selling in the $20s.. :o The biggest thing driving prices right now is uncertainty. Nobody knows when the lockdown will end and what loan losses will be. Same thing with insurance companies and BI/compensation losses. Link to comment Share on other sites More sharing options...
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