Is Wells Fargo Ripe for the Picking?

With shares of Wells Fargo & Company (NYSE:WFC) trading at around $34.76, is WFC an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

wells_fargo_140Wells Fargo managed the financial crises of 2008/2009 better than any other major bank. It’s one of the best-run banks in the world, and it’s also now one of the biggest banks in the world after its acquisition of Wachovia. Wells Fargo has high margins and a strong balance sheet, and it’s trading at just 10 times earnings. It’s also one of Warren Buffet’s favorite companies — he invests more money into Wells Fargo every year. Another positive is that a dividend increase is possible in the near future.

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Wells Fargo is a company that likes to pour money into investments that work. It will now commit $500 million to aircraft leasing, and if it pays off, the bank will increase its investment. This venture has many good aspects. One is that Wells Fargo can make a dent in the industry without risking too much capital. While $500 million is a fortune for most companies, it’s a drop in the bucket for this big bank. Another plus is that airlines prefer aircraft leasing because it allows them to avoid long-term contracts and increased expenses. Therefore, it’s a win/win for both parties, which is always the best kind of deal. On the other hand, if the economy falters, then this type of investment will head south fast. That said, Wells Fargo is smart enough to get out of a business prior to that business leading to long-term trouble for the company.

Let’s take a look at some important numbers prior to forming an opinion on the stock…