Wells Fargo WFC
I am writing this post to show why most of my money is going into WFC at this point in time. First I am going to start with the balance sheet. That is where I start with every company I look at.
Reference WFC 10K and 10Q balance sheet.
Now first place I am looking at to even see I if I should even bother with this bank is the ratio of long term debt to short term debt 1.5 to 1 is favorable but WFC is even better than that . Banks get in trouble if they borrow short and lend long. Ask Bear Stearns! They are an extreme case. Bank of American had 2 dollars of short term debt to for every dollar of long term debt. That got them in more trouble than most of its peers. The stock price of BAC reflects this. We all know now leverage can get u into big trouble. OK back to WFC. If u go into quarterly u will see WFC now has just $.14 of short term debt for ever dollar of long term debt! (30.8 billion of short term to 214.29 billion) That makes me be able to sleep at night.
The Wacovia deal will take WFC over the top because of total deposits. In three years I am willing to bet earnings each quarter will be just over $4 billion a Quarter and net income will be $16 billion or more for the year. Now put a 15 PE on that and u have a market cap of 240 billion. Currently the market cap is 125 billion, with dividends that will be double your money. Now a safe investment that will double your money in 3 years I am in. Just over half of ALL my money is invested in WFC at this point in time. Granted there are many other deals out there right now but I am looking pass the three years. Pull up a long term chart of WFC 1985 to present. Not many companys can top that performance. WFC went through this same housing stuff in early ninetys. LOL it is nothing new and it will happen again. But with WFC lending practices I feel confident it will weather the storms.
Look at interim income statement WFC is making 3 billion currently each quarter after wacovia deal. This is with loan loss provisions sky high and a terrible economy. And there is gonna be some pent-up housing and building demand because no one is building right now. In 5 years when the ecomony is ripping I know WFC will be too.