Tuesday, April 2, 2013
"In 2012, we grew revenue 6 percent to $86.1 billion, mostly from noninterest income. (Imagine our earnings power when a more normal rate environment returns.) The revenue growth included double-digit growth in our capital markets, commercial real estate, corporate banking, mortgage, asset-based lending, corporate trust, and international businesses." - John Stumpf - 2012 Wells Fargo Annual Report
John Stumpf is an amazing CEO and runs a tremendously profitable company in Wells Fargo (WFC). I too can only imagine the earnings power when a more normal interest rate environment returns. Wells Fargo will be an earnings dynamo.
It was just over two years ago when I woke up and realize what a ridiculously cheap price Wells Fargo was selling at. Since then I have averaged 16.5% annually plus dividends in a sub optimal economy. Bring on the good times. I fully expect the dividend on my original cost to yield over 8% within two years as the economy normalizes and earnings per share reaches $4 in 2014.
I find it remarkable how nobody is interested in a boring, yet high quality bank like WFC. Meanwhile Warren Buffett is quitely buying 1.2 billion dollars worth of their stock in 2011 and 1.8 billion dollars worth in 2012. I have been beating the drum on them for the past two years too. During that time frame, the earnings per share has risen 23.5% annually. I also believe that an investor today will also realize a benefit from the low relative valuation, not just earnings growth. Growth and value are joined at the hip.
Disclosure: Long WFC
Posted by Kevin Graham at 10:23 PM