Wells Fargo & Co. (NYSE:WFC) is the talk of the financial sector having soared by 17% in the year outpacing peers in terms of performance in the process. TheStreet’s Jonathan Marino reports that Buffet has gone long on the stock as the company continues to attain substantial gains in the mortgage-lending space.
“Company’s post-recession rise came in part thanks to its growing mortgage lending business and last year Warren Buffet increased his exposure to Wells. With four straight quarters meeting or beating estimates, Buffet may want to double down in his annual letter to,” said Mr. Marino.
Wells Fargo’s impressive earnings for the year have been attributed to the ongoing recovery of the housing markets. Wells Fargo & Co. (NYSE:WFC) is among the few banks that have leading exposure of the housing markets. Impressive performance also comes on the heels of its fierce rivals in the space led by Citigroup Inc. (NYSE:C) and JPMorgan Chase & Co. (NYSE:JPM) incurring hefty fines related to inappropriate mortgage-trading during the financial crisis.
Bank of America Corp (NYSE:BAC) has been one of the biggest losers in the mortgage industry having incurred a fine of $17 billion over allegations it sold substandard mortgage securities during the financial crisis. Mr. Buffet has over the years reiterated that his investment in Wells Fargo & Co. (NYSE:WFC) remains a core holding.
“Wells is one of the Berkshire biggest holdings. Fortunately for Warren the stock is up 17% so far this year part of what Wells Fargo has outperforming companies including Bank of America Corp (NYSE:BAC), US Bank Corp, JPMorgan Chase & Co. (NYSE:JPM) and City. Its return on equity and its return on asset nearly 1.5%, it is also part of the reasons Wells is trading at a healthy premium to its book value more than all this competitors,” said Mr. Marino.
Buffet approval for Wells Fargo & Co. (NYSE:WFC) has to do with the fact that the bank has maintained a strong and convincing performance over the years. The banks impressive performance has been one of the reasons why investors have continued to rank the stock as a superior investment with solid future prospects.
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