Wells Fargo

ok, finally someone feels it's not right, change CEO?

Bopian really change CEO

Wells Fargo CEO Stumpf Quits in Fallout From Fake Accounts
John Stumpf, who led Wells Fargo & Co. through the financial crisis and built it into the world’s most valuable bank, stepped down as chief executive officer and chairman, bowing to public outcry over legions of accounts opened by his employees for customers who didn’t request them.

waos.... is america leading the charge for ethical leadership in banking sector after the 2009 GFC?!!

Wall Street isn’t sure what to think. Wells Fargo’s stock has regained the $30 billion it lost, which is as much a sign of optimism about deregulation in the new administration as anything. But “we gave them too much credit for being Superman in the banking industry,” says one major investor. “Now the cape has come off, and Wall Street is realizing they are just like everyone else and no better than anyone else.”

HOW WELLS FARGO’S CUTTHROAT CORPORATE CULTURE ALLEGEDLY DROVE BANKERS TO FRAUD

Most Americans have assumed their bank accounts are sacrosanct. But with the major scandal unfolding at Wells Fargo, angry former employees illuminate the alarming pressure that allegedly led local bankers to defraud perhaps more than a million customers.

http://www.vanityfair.com/news/2017/05/w...ture-fraud

Didn't follow too closely with the Well Fargos issue. But seems like the fall out is gettting contagious - After the falsification of new accounts/credits to overcharge retail customers, there seems to be a new fall out (admitted in late July) for auto insurance. Will there be more skeletons drawn out from the closet?

Wells Fargo: What It Will Take to Clean Up the Mess

http://knowledge.wharton.upenn.edu/artic...lean-mess/

WFC, 5th largest holding in Berkshire, is now badly beated down to P/E < 10, P/B < 1.1.
https://www.reuters.com/companies/WFC.N/key-metrics

Although Berkshire has been reducing its stake in WFC recently, the sell down does not seem to be specifically due to the fake a/c scandal. In the interview, WB mentions the commercial bank earn btw 12 - 16% net tangible assets and are fantastic businesses !
https://finance.yahoo.com/news/warren-bu...15520.html
Note, for the full interview, pls refer to karlmarx's post.

Issues to consider
https://www.channelnewsasia.com/news/bus...o-12328862

WB's take on BOA(2nd largest) seems to be in contrast with WFC  ....
https://sg.finance.yahoo.com/news/berksh...38654.html

Cld this be a rare opportunity to own one of Berkshire's core holdings, since value investors take a long term view - Thoughts anyone ?

https://www.cnbc.com/berkshire-hathaway-portfolio/

I thought it's quite obvious what his selling implies about the long-term quality of WF.

(06-03-2020, 11:44 PM)dreamybear Wrote: WFC, 5th largest holding in Berkshire, is now badly beated down to P/E < 10, P/B < 1.1......

Cld this be a rare opportunity to own one of Berkshire's core holdings, since value investors take a long term view - Thoughts anyone ?

WFC's price has appreciated by some 80% since I bought last year and I am still holding. 

However, I do note the action by Berkshire to sell nearly all of WFC, and CM did touch on WFC at the DJ annual mtg(2nd link below).

I am waiting for the lifting of Fed asset cap(info on asset cap 4th link below), and hoping for its P/B valuation metric to catch up with its peers eventually. 

Berkshire sheds nearly all of Wells Fargo, a holding since 1989
https://www.reuters.com/business/finance...021-05-17/

Munger diverges from Buffett on Wells Fargo :'Warren got disenchanted'
https://finance.yahoo.com/news/munger-di...35811.html

Is Wells Fargo Stock A Buy After Snapping Earnings Losing Streak?
https://www.investors.com/research/wells...k-buy-now/

Wells Fargo, IBD Stock Of The Day, In Buy Zone — Barely — After Key Step Toward Lifting Fed Curbs
https://www.investors.com/research/ibd-s...-sanction/

I first invested in WFC in the aftermath of the GFC and so paid some attention to it over the years.

But I find banks generally difficult to understand - what is one bank's long-term competitive advantage over another (emphasis on long-term).

WB used to heap praise on Kovachevick (the CEO before Stumpf) who protrays the bank as a department store and emphasised greatly on cross-selling, which I thought, so this is that long-term competitive advantage. That emphasis would however fuel the culture that led to the scandal years later.

My impression of Wells Fargo tanked after the scandal. The hurt and damage caused to shareholders is great. Billlions in fines and billions (not millions) spent on consultancy services.

Charles Scharf came in as CEO and started to re-organise the company. The work and the time that has lapsed suggests that beneath the non-wall-street nature, de-centralised model, and folksy charm of Wells Fargo, there are a lot of controls and systems that need to be improved.

So I have definitely been lazy and careless in my analysis of Wells Fargo and my objectivity impaired by my awe for WB. Before the scandal, Wells Fargo would report for many consecutive quarters, an increasing trend for the number of products sold to a single customer. A discerning investor would have asked himself then, how can this go on for such a long time, and what kind of perverse incentive would this have created.

Interestingly, Charlie Munger, didnt think too highly of Kovachevick / Stumpf - that the CEO talks too much, if I recalled correctly. Charlie however has not sold his stake in Wells Fargo. Of course his margin of safety is large, having got it at a much lower price that most of the market.

If there's a good development that came out of my Wells Fargo investment, it is that it led me to M&T bank. Its Chairman Statement I think is even better than than of Berkshire Hathaway. Reading a few years of the Chairman Statement (especially those of Robert Wilmer's era) had certainly helped developed my intrinsic understanding of banking as an industry, beyond those much quoted typical banking sector ratios.

So I would recommend M&T bank to keep an eye on if one is keen to invest in U.S. banks.

(03-06-2021, 10:53 PM)Choon Wrote: Interestingly, Charlie Munger, didnt think too highly of Kovachevick / Stumpf - that the CEO talks too much, if I recalled correctly. Charlie however has not sold his stake in Wells Fargo. Of course his margin of safety is large, having got it at a much lower price that most of the market.

IMHO, the margin of safety matters at the point when we commit our capital to purchase a company, ie. MOS is defined as the difference in the intrinsic value of the company VS the price we pay at point of purchase. Beyond that, our purchase price is meaningless and only acts as an anchor that does us no good.

I am not sure whether it is meaningful to continue to calculate a margin of safety between current market price VS cost. Rather than margin of safety, I would deem it as false sense of security.

While I am not Charlie Munger but respectfully, I will bet my last dime that Charlie Munger doesn't think like that. There are tons of reasons for not selling and I wouldn't try to second guess why. But it is not hard to imagine that he is not selling because it is either (1) it is not over priced (quantitative), (2) the qualitative reason/s for selling has not been triggered. I don't think he cares a bit how much he got it for in the first place...