Miller Value Partners: “Wells Fargo (WFC) Will Be A Top Performer Over the Next Couple of Years”

Miller Value Partners, an investment management firm, published its ‘Deep Value Strategy’ fourth-quarter 2020 Investor Letter – a copy of which can be seen here. A net return of 64.9% was recorded by the fund for the Q4 of 2020 which is twice as much of its S&P 500 benchmark return. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Miller Value Partners, in their Q4 2020 Investor Letter, said that Wells Fargo & Company (NYSE: WFC) has been added in their portfolio during the second half of 2020. Wells Fargo & Company is a financial services firm that currently has a $138.9 billion market cap. For the past 3 months, WFC delivered a 39.30% return and settled at $33.53 per share at the closing of February 12th.

Here is what Miller Value Partners has to say about Wells Fargo & Company in their Q4 2020 investor letter:

“During the second half of the year, we initiated a position in Wells Fargo (WFC). The company’s share price has been under significant pressure since the 2016 account scandal, leading to senior management resignations, significant incremental expenses, and regulatory oversight. The company has a new CEO, Charlie Scharf, who joined in 2019 from JP Morgan. Charlie has been moving quickly to turnaround the company. He has brought in six new members to the Operating Committee all from outside the company and has recruited numerous successful senior executives from JP Morgan, BNY Mellon, and other leading financial institutions to fill senior roles at the bank. The company is taking a fresh look at each business segment, benchmarking against its peers. The company’s operating efficiency is more than 1700bps out of line with their peer group, providing a $10B cost and efficiency opportunity over the next couple of years. Wells Fargo’s stock price was more than cut in half during 2020; we entered the position at a 40% discount to book value which was near 30 year lows and approaching 2008-09 Financial crisis levels. Over the next couple of years, greater operating efficiencies and loan growth would support a return to 10%+ ROE, normalized EPS of $5/share, and book value likely approaching $50/share. We believe it’s more likely than not Wells Fargo’s share will be a top performer over the next couple of years.”

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Just recently, we published an article about Billionaire Ken Griffin’s Top 10 Stock Holdings and Wells Fargo & Company (NYSE: WFC) is part of it. WFC delivered an 11.10% return YTD.

Our calculations show that Wells Fargo & Company (NYSE: WFC) does not belong in our list of the 30 most popular stocks among hedge funds.

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