5 Best Financial Advisory Firms To Buy Now

2. Wells Fargo & Co (NYSE: WFC)

Wells Fargo offers financial advisory services under its Wells Fargo Advisors banner. The stock was recently upgraded by Credit Suisse to Outperform from Neutral. Credit Suisse analyst Susan Roth Katzke said in a report that Wells Fargo provided clarity about its path to recovery and strong returns. The analyst increased Wells Fargo price target to $40 from $30.

At the end of the third quarter, 90 elite hedge funds tracked by Insider Monkey reported owning stakes in Wells Fargo. The total value of these stakes is $8.47 billion.

Argosy Investors said the following about WFC stock in their Q4 2020 Investor Letter:

“Most of us are familiar with Wells Fargo (WFC); they are one of the top 5 banks in the U.S. with nearly $2 trillion in assets. The last 5 years have not been good to Wells. They are on their 3rd CEO during that time, and the current one stays in New York City despite headquarters being in San Francisco. Wells Fargo opened millions of fake accounts for customers over several years, driven by an incentive system that compensated branches based on their account openings. This goes to show you the perverse power of incentives, if not properly balanced. To atone for their sins, Wells Fargo is operating under an asset cap which prevents the bank from growing and must demonstrate stronger risk management. Not that long ago, Wells Fargo was the most admired large bank on Wall Street, with the highest valuation and glowing reviews about its low cost of funds driving sustainably high returns on equity. Now, it has the lowest valuation on Wall Street and no one talks about the good old days with Wells.

I believe that there is nothing fundamentally wrong with Wells Fargo’s business that cannot be fixed, and once they can return to normal operations without the fake account nonsense then I expect they will return to earning returns slightly lower than historical norms. If Wells Fargo uses 100% of its earnings to repurchase share over the next 3 years, Wells can retire 25% of its outstanding stock. By 2023, WFC could earn $6+ per share. At 10x earnings, a very low multiple given the rest of the stock market trades at 22x earnings, Wells Fargo could fetch $60 per share. WFC’s current share price is $33 and our cost basis is around $25 per share. If it takes 5 years for Wells to get out of the penalty box and trade at $60 per share, we can earn a 20% annual return on our investment, including dividends.”

Read: Is Wells Fargo (WFC) Stock a Buy For 2021?