Wachovia Shouldn't Slow Wells Fargo Down

Goldberg isn't alone in his bullish stance on the company. Wells counts Warren Buffett's Berkshire Hathaway (BRK-A) among its major institutional holders. Berkshire holds an $11 billion stake that's worth about 7.8% of shares outstanding. Among other big investors, Barclays (BCS) and State Street (STT) each own around 3.5%.

The stock also offers an attractive dividend, expected to be $1.36 in the coming year for a yield of 4.6%. Goldberg noted that Wells has been one of the few banks to raise its dividend in the past year, and he said the payout appears safe.

Wells' competition has been hammered over the past year. Shares of Citigroup (C) have plummeted about 76%, Bank of America (BAC) has lost 65% and JPMorgan Chase (JPM) have tumbled 27%. By contrast, Wells is only down 1.1%.

Thanks in part to the stock's outperformance, Wells shares currently trade at a premium to others in the financial space. The stock sports a price-to-earnings ratio of 16.77 based on 2009 earnings estimates from Thomson Reuters. Rivals JPMorgan Chase and Bank of America trade with P/Es of 12.72 and 6.93, respectively.

Writing in a research note, Credit Suisse analyst Todd Hagerman says that Wells' consistent earnings and strong balance sheet help justify the premium valuation. He also foresees growing market share for the company and the potential for an upside earnings surprise in coming quarters.

The market volatility has contributed to a recent dip Wells' share price. Trading around $29.32, the stock is down 26% from its all-time closing high of $39.41, reached on Sept. 19.

That dip may offer an opportunity for investors who believe the Wachovia acquisition won't yield additional nasty surprises. Should the integration go smoothly, Wells Fargo looks well positioned to continue expanding market share and generating consistent earnings as a newly-minted nationwide banking presence.

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