Wells Fargo has actually become one of the best growth opportunities.
Shares of this storied financial institution, of which Warren E. Buffett hasn't sold a single share after the fake account scandal erupted in September, are up 15%-plus since Sloan took charge of affairs.
It is evident that Wells Fargo has managed to garner investor acceptance. Consider its close rivals: Citigroup is up about 9% in the past month; shares of JPMorgan Chase, the biggest lender in terms of market value, are up about 13%; and U.S. Bancorp, the fifth-largest national commercial bank, has seen a nearly 12% jump.
Wells Fargo and Citigroup are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells WFC and C? Learn more now.
There are three factors that explain why the bank is doing well.
Buffett's Berkshire Hathaway is Wells Fargo's biggest shareholder. He personally owns 2 million shares.
The Oracle of Omaha, who considers Wells Fargo to be an "incredible institution," has suggested that Tim Sloan is the right man for the job.
The second factor helping Wells Fargo is that Sloan has ushered in an era of transformation at a fast clip. Stumpf was known for driving an aggressive incentivized structure, compelling employees to commit large-scale fraud.
Further, the stock has already survived the relentless wave of negativity, such as fines, suspension of business, litigation losses and potentially an S&P credit downgrade. The stock is pricing in these elements and finally coming up for air.
Finally, financial stocks especially banks, big and small, have been pushed ahead by Donald Trump's shocking victory in the presidential election.
The prospect of higher interest rates and lighter regulation is dwarfing anxieties over new U.S. trade strategies.
Previously, bank stocks were overwhelmed by Dodd-Frank regulations and an environment unfavorable for supporting a sturdier level of economic development. That could change soon.
Most importantly, Wells Fargo has found renewed investor confidence, with traders ready to look beyond the account-opening scandal.
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