3 Smart Ways to Invest in Bank Stocks: Bank of America Corp (BAC), Wells Fargo & Company (WFC)

3. Who the bank is lending to
Banks have many different ways in which to make money. But even in this age of derivatives and collateralized debt obligations, the very old-fashioned model of lending money and charging interest still counts. And in this age of a resurgent housing market, I’ve been looking at which banks are making hay in housing.

One of these banks is Wells Fargo & Company (NYSE:WFC). While it made fewer loans in the fourth quarter of last year versus the third quarter ($125 billion versus $139 billion, respectively), Wells is still the country’s largest home lender. And with Ben Bernanke making a full-court press to bring the housing market back from the dead with his aggressive quantitative easing plan, being No. 1 in housing is a good place to be — for both Wells and its investors.

Final Foolish thought
There are almost as many ways to invest as there are investors, but three basics listed above are easy to get one’s head around and always good places to start when you’re thinking about banks.

In case you didn’t notice, Wells Fargo is one of my favorite banks in the market today. Its dedication to solid, conservative banking helped it vastly outperform its peers during the financial meltdown. Today, Wells is the same great bank as ever, but with its stock trading at a premium to the rest of the industry, is there still room to buy, or is it time to cash in your gains?

The article 3 Smart Ways to Invest in Bank Stocks originally appeared on Fool.com and is written by John Grgurich.

Fool contributor John Grgurich owns shares of JPMorgan Chase. Follow John’s dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo.

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