Morgan Stanley’s Top 5 Stock Picks for 2022

3. Wells Fargo & Company (NYSE:WFC)

Number of Hedge Fund Holders: 88

Wells Fargo & Company (NYSE:WFC) is a financial services company with about $1.9 trillion in assets. It serves one in three US households and over 10% of all middle market companies in the US. CNBC has reported that the stock is among Morgan Stanley’s top stock picks for 2022, being a top play for rate hikes because of its rate-sensitive, attractive valuation.

Analyst Betsy Graseck at Morgan Stanley upgraded Wells Fargo & Company (NYSE:WFC) shares to Overweight in December 2021.

The EPS for Wells Fargo & Company (NYSE:WFC) in the fiscal fourth quarter was $1.25, while its revenue was $20.86 billion. Both beat estimates by $0.25 and $2.19 billion, respectively.

Insider Monkey’s hedge fund data for Wells Fargo & Company (NYSE:WFC) shows 88 hedge funds long the stock in the third quarter. Their total stake value was $6.2 billion.

Davis Funds, an investment management firm, mentioned Wells Fargo & Company (NYSE:WFC) in its third-quarter 2021 investor letter. Here’s what they said:

“…This second chart highlights that financials remain the cheapest part of the market today and continue to be extremely attractive. Strong capital ratios, conservative lending practices, already recordlow interest rates and now a strengthening economy, all paired with low valuations, bode well for future returns.

Take our top financials holding in Wells Fargo, for instance. Wells Fargo is trading at 1.3x tangible book value, while we expect return on equity (ROE) to be in the mid-to-high teens over time. Even in this low-rate environment, the current multiple is only 12x 2021 owner earnings, and our IRR estimate is 12–13%. Wells Fargo has performed well this year, up 51% year-to-date, yet still looks very attractive, which speaks to how undervalued it was and why it is so important to be patient when investing in high-quality companies trading at low valuations. Rather than invest on the basis of unpredictable near-term catalysts, we prefer to be patient as earnings and cash build up, even if the stock price does not immediately reflect the economic reality. We continue to like our positions in financials.”