Motley Fool analyst Anand Chokkavelu is buying Wells Fargo in his real-money portfolio. Here's his logic.
Wells Fargo is a sound bank, with continued room to grow on the operational side, plus the possibility of multiple expansion. Scooping up Wachovia was a smart move, making it a lot stronger, and adding to its asset base, and it's been scooping up lots of mortgage market share, as well.
Another factor is upside. It's easy to say that many banks have great upside, but the challenge is actually realizing that upside, and Wells Fargo has a higher chance of executing on that than many of its peers.
The stock is expensive on a relative basis, trading at 1.3 times book value (or 1.7 times tangible book value), but over the past 10 years, it's often been double the current multiples.
Final piece of evidence that Wells Fargo is a buy: Warren Buffett has been buying up shares lately, as well.
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Anand Chokkavelu owns shares of Bank of America, Citigroup, Wells Fargo, Berkshire Hathaway, and JPMorgan Chase. He also owns long-dated options on Bank of America, and warrants on Citigroup, Wells Fargo, and JPMorgan Chase. Andrew Tonner owns shares of Wells Fargo & Company. The Motley Fool owns shares of Bank of America, Berkshire Hathaway, Citigroup Inc , and Wells Fargo & Company, and has the following options: short OCT 2012 $33.00 puts on Wells Fargo & Company and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Berkshire Hathaway and Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.