This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Wells Fargo Excels at the Only Trade That Matters to Investors

NEW YORK ( TheStreet) -- As it turns out, Wells Fargo (WFC - Get Report), the Main Street competitor to Wall Street-oriented titans like JPMorgan Chase (JPM - Get Report), had a great trading year.

It's just not for the reasons you might think.

A recent report suggests Wells Fargo secretly engages in the type of Wall Street trading activities in esoteric and risky products normally dominated by the likes of JPMorgan, Goldman Sachs (GS) and Bank of America (BAC - Get Report).

The truth is Wells Fargo's trading skill is far more pedestrian and profitable than one might think: buying back its own stock.

The nation's top mortgage lender may simply be effectively plying the very trading rules that its largest investor - Warren Buffett of Berkshire Hathaway (BRK.A - Get Report) - has long advocated.

After disclosing a 48 million share buyback in fourth quarter earnings, Wells Fargo ended 2012 having repurchased roughly 120 million shares at an average price of $32.35.

As the San Francisco-based lender petitions the Federal Reserve to increase its dividend payout above current levels, Wells Fargo investors are likely appreciative of the bank's near $4 billion in total 2012 stock buybacks, which came, on average, roughly 8% below current stock trading levels.

Still, investors might want to see more by way of buybacks. Overall, Wells Fargo's share count didn't budge much in 2012 and buybacks basically offset share issuance for stock compensation. "[Over] the long term we like to do better than what we did this year," said CFO Tim Sloan.

Wells Fargo shares less than 1% lower on Friday to $35.10 after record fourth quarter earnings came with strings attached.

Using crude math and Wells Fargo's mean book value per share value of $26.56 reported through 2012, those buybacks came at an average price of roughly 121% of the firm's reported book value.

Buffett, an over 13% shareholder in Wells Fargo, may have been taking notes.

In December, the 'Oracle of Omaha' turned heads when Berkshire Hathaway authorized a $1.2 billion buyback at a price of 120% of book value, a higher premium than the 110% mark the financial conglomerate outlined as its threshold at the outset of 2012.

Wells Fargo's Wall Street brethren, most notably JPMorgan, have shown less aptitude in the buyback trade, and actual trading losses have made authorizations less predictable.

After a big 2011 buyback program, JPMorgan CEO Jamie Dimon was left apologizing to shareholders for a double digit loss on some of those repurchases. Meanwhile, a trading loss that exceeded $6 billion in 2012 forced Dimon to retreat from a $15 billion authorization for the year. [In the third quarter, JPMorgan reinstated a multi-billion dollar buyback plan]
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.77 0.00%
BRK.A $220,252.50 0.00%
BRK.B $146.89 0.00%
JPM $63.79 0.00%
WFC $50.59 0.00%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs