Warren Buffet's Favorite Bank, Wells Fargo, Is On Sale
The financial sector got hammered yet again. Shares of Wells Fargo (WFC), one of Warren Buffet’s favorite banks, and a large holding of the Berkshire Hathaway portfolio has also been hammered. Today it went down as far as $23.96 at one point!
Like Warren Buffet & Benjamin Graham (Buffet’s teacher) stated, the intrinsic value calculation is only an approximation of the true value. Everyone’s calculated intrinsic value will be different. So use conservative numbers and be a bit realistic!
From all the usual metrics and intrinsic value calculations, WFC looks to be very cheap with a good margin of safety!
How far off is my intrinsic value calculation?
Buffet would have slightly different reasons and prices for buying than we would. But I do know he is a value investor, and also performs simple intrinsic value calculations as well. Based his past purchases, there is a great chance that it isn’t far off. His recent purchases of WFC were :
– 2007Q2 (~$33.07)
– 2007Q3 (~$34.90)
– 2007Q4 (~$31.60)
– 2008Q1 (~$29.10).
Each quarter I am pleasantly surprised he acquired WFC as predicted based on what we see with the calculated intrinsic value and other metrics. But as a small individual investor we may need to demand a higher margin of safety than he would, and hence lower purchase prices.
For all you followers of WFC, calculate your intrinsic value & margin of safety (among other numeric metrics). Read up on the company to see how they are doing. WFC may an investment that has reached a suitable price for you!
Thanks & Happy Investing!
The Investment Blogger
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Don’t know how value investing works? I always recommend reading Intelligent Investor by Benjamin Graham as good starting point. I posted links to the exact edition that I read and recommend: