Author Topic: WFC - Wells Fargo  (Read 221189 times)

shalab

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Re: WFC - Wells Fargo
« Reply #710 on: April 15, 2018, 11:18:40 AM »
I did YoY calculations for JPM and WFC. JPM was low 2% in buy backs where as WFC was high 2% (~2.77% I think). In addition - these are the numbers for WFC and JPM.

Last 5 year earning growth: 21% for WFC, 10.5% JPM
Last 5 year book value growth: 10% for WFC, 7% for JPM

When WEB said his best ideas are in berkshire, he wasn't joking - as with the Korean stocks (where he made 500 mm for Berkshire through Samsung).

I too don't like stock issuance by WFC but one of the advantages of low stock price is that many of the RSUs will expire worthless. This increases bang for the buck of share re-purchases.

That said, I think Wells is a good investment. 6% returns are guaranteed - 3% from dividend yield and 3% from share buy-backs. Both these are better than JPM. I think it will be in the 10-15% range for the next few years.

I see the div yield difference of 3% for WFC vs 2% for JPM.  I'm not getting the share buyback difference though?

WFC authorized $11.5 billion for 2017 CCAR, which is a yield of 4.6% off of closing price;
JPM authorized $19.4 billion for 2017 CCAR, which is a yield of 5.2% off of closing price.

I imagine JPM will have a better 2018 CCAR and increase capital return more than WFC given the exceptional performance by JPM and the lower earnings growth/regulatory overhang of WFC.

Both trade at the same earnings multiple.


Or, perhaps consider Citi, who trades at a lower multiple than WFC, has more room to improve, but less overhang. 

Div yield is 1.8% (much lower, but by 1.2%);
Share repurchase of $15.6 billion for a yield of 8.6%, and these repurchases will probably be more effective than WFC or JPM, given the lower price to TBV (assuming they get profitability to a decent level at some point (maybe 2020).



I also think WFC tends to issue more shares, so the net buyback isn't as good.  JPM share count consistently dropped over the last few years; WFC is not as consistent.  I didn't run the check like I did with JPM/C/BAC though, so this is off recall.  Please correct if I'm off here.


racemize

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Re: WFC - Wells Fargo
« Reply #711 on: April 15, 2018, 01:16:49 PM »
I did YoY calculations for JPM and WFC. JPM was low 2% in buy backs where as WFC was high 2% (~2.77% I think). In addition - these are the numbers for WFC and JPM.

Last 5 year earning growth: 21% for WFC, 10.5% JPM
Last 5 year book value growth: 10% for WFC, 7% for JPM

When WEB said his best ideas are in berkshire, he wasn't joking - as with the Korean stocks (where he made 500 mm for Berkshire through Samsung).

I too don't like stock issuance by WFC but one of the advantages of low stock price is that many of the RSUs will expire worthless. This increases bang for the buck of share re-purchases.


I suspect CCAR is a bit better for estimating what will happen rather than what has, but even looking back, I'm not sure how well WFC does vs JPM on net share buybacks.  Primarily using valueline for historical values below:

YoY change 2016-2017:
WFC: 4891.6/5016.1 = -2.5%
JPM: 3425.3/3561.2 = -3.8%

Change since 2010:
WFC: 4891.6/5226.8 = -6.4%
JPM: 3425.3/3910.3 = -8.8%

On earnings, 2017 had a pretty big charge for JPM in Q4, and the tax change is pretty big, so here's earnings growth from 2010 to Annualized 2018Q1:
WFC: 1.12*4/2.21 = 102.7% -> 9.2% CAGR
JPM: 2.37*4/3.96 = 139% -> 11.5% CAGR


EDIT: I'm assuming you are also using valueline for those 5 year earnings growth numbers.  I'm really confused how they have WFC at 5 year annual growth of 21%--earnings 5 years ago were $3.89, in 2017 they were 4.10, which is 5% cumulative growth and nowhere close to 20% annual.
« Last Edit: April 15, 2018, 01:19:57 PM by racemize »

shalab

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Re: WFC - Wells Fargo
« Reply #712 on: April 15, 2018, 03:00:24 PM »
Yes, I looked at valueline. The growth from 2018-2020 looks identical for these two.

I did YoY calculations for JPM and WFC. JPM was low 2% in buy backs where as WFC was high 2% (~2.77% I think). In addition - these are the numbers for WFC and JPM.

Last 5 year earning growth: 21% for WFC, 10.5% JPM
Last 5 year book value growth: 10% for WFC, 7% for JPM

When WEB said his best ideas are in berkshire, he wasn't joking - as with the Korean stocks (where he made 500 mm for Berkshire through Samsung).

I too don't like stock issuance by WFC but one of the advantages of low stock price is that many of the RSUs will expire worthless. This increases bang for the buck of share re-purchases.


I suspect CCAR is a bit better for estimating what will happen rather than what has, but even looking back, I'm not sure how well WFC does vs JPM on net share buybacks.  Primarily using valueline for historical values below:

YoY change 2016-2017:
WFC: 4891.6/5016.1 = -2.5%
JPM: 3425.3/3561.2 = -3.8%

Change since 2010:
WFC: 4891.6/5226.8 = -6.4%
JPM: 3425.3/3910.3 = -8.8%

On earnings, 2017 had a pretty big charge for JPM in Q4, and the tax change is pretty big, so here's earnings growth from 2010 to Annualized 2018Q1:
WFC: 1.12*4/2.21 = 102.7% -> 9.2% CAGR
JPM: 2.37*4/3.96 = 139% -> 11.5% CAGR


EDIT: I'm assuming you are also using valueline for those 5 year earnings growth numbers.  I'm really confused how they have WFC at 5 year annual growth of 21%--earnings 5 years ago were $3.89, in 2017 they were 4.10, which is 5% cumulative growth and nowhere close to 20% annual.