Wells Fargo Is the Top Turnaround Play

This blog post originally appeared on RealMoney.com on Aug. 3. at 10:45 a.m. EDT.

People want cyclicals. OK, I will give you a cyclical: Wells Fargo(WFC Quote). This one has got to be the single most cyclical name out there, so levered to the turn in the economy on every front.

First, it is considered under-reserved. Of course, WFC says it is perfectly reserved (we agree in Action Alerts PLUS, although we want to be bigger lower). Second, it is a vast repository of homes that are stabilizing in value. Third, it is a small-business lender par excellence. Fourth, it has a ton of commercial real estate. Fifth, it is lending like mad.

Isn't that what you want in a cyclical, a broad exposure to the turn in the American economy? Yet, it's being totally lost as a cyclical play, bogged down in the endless articles about how WFC is just winging it, flying blind, horrible businesses including the miserable Wachovia portfolio.

(Obviously, some people see the cyclicality of the banks, but they are seizing on KeyCorp(KEY Quote) and Fifth Third Bancorp(FITB Quote) and Marshall & Ilsley(MI Quote) to play it. That's misplaced reasoning, as Wells is hugely depressed with a much bigger and better franchise and management.)

You should think of WFC like Ford(F Quote). The automaker had a billion-dollar cash burn. It needs financing to grow. It is reliant on the American consumer, which is its weak business. And it has just doubled.

Wells Fargo is the Ford of banking. It is the logical call on the turn. The decision to be so-called "under-reserved" might turn out to be just right, and if that's the case, this one's going to rally past them all. It simply isn't as "bad" as Bank of America(BAC Quote), and look at that one go!

Random musings: Here's some negativity, The Wall Street Journal is already out with "caution on Barclays(BCS Quote) and HSBC(HBC Quote). Meanwhile, I am trying to figure out if they are going to buy BB&T(BBT Quote), the bank that didn't need TARP, according to its CEO this weekend, to which I say, "You have to be kidding me." The WSJ also with China hooked on stimulus. You have to be kidding me. The country's cutting back, the fire has been lit. ... I still like Wynn Resorts(WYNN Quote) up here, despite MGM Mirage(MGM Quote).

At the time of publication, Cramer was long BAC and WFC.