Jump to content

USB vs WFC


benchmark
 Share

Recommended Posts

I've bought some USB, WFC at the lows during the crisis. Given that I have too much in financials, I am thinking about selling some to move to AIG warrants. Though WFC has Buffet endorsement, but USB is much smaller, and can grow a bit faster. I'd like to hear board's opinion on which one to sell and why?

 

TIA.

Link to comment
Share on other sites

On moving to AIG warrants as a way of limiting exposure to financials...

 

There was a point in summer of 2011 when Benmoche said that a 50% drop in the equity markets would put pressure on their capital levels.  I never understood his comment as I didn't think they were all that exposed to the equity markets in the first place.  Does anyone else remember him saying that and the context?

Link to comment
Share on other sites

I think WFC is selling at a lower multiple of normalized earnings than is USB (<10 times earnings for WFC, 11-12 times earnings for USB). Not that twelve times earnings is expensive for a good company, but USB will probably have to grow revenues in the high single digits to provide the same return as WFC. They can probably generate this kind of revenue growth, but why not take the safer bet with WFC? At identical valuations I may go with USB, but not when WFC is 15% to 20% cheaper as is currently the case.

 

I used to own both, but sold USB once it got over $30 to buy BAC. I still hold a good amount of WFC. Notice that Buffett has been consistently buying more WFC, but his USB position has been stable for a while and may even have gone down some in the last quarter.

 

 

 

 

Link to comment
Share on other sites

On moving to AIG warrants as a way of limiting exposure to financials...

 

There was a point in summer of 2011 when Benmoche said that a 50% drop in the equity markets would put pressure on their capital levels.  I never understood his comment as I didn't think they were all that exposed to the equity markets in the first place.  Does anyone else remember him saying that and the context?

 

do you have a pointer to the original speech/video?

Link to comment
Share on other sites

In theory USB should trade at a bigger premium to book than WFC assuming that reinvestment rates are equal because ROE is higher and is projected to be higher going forward.

 

I like USB, and my investment has a higher gain on USB as well. Buffet seems to have trimmed USB in the last quarter, while continued his purchase on WFC. I'm wondering what he sees in WFC  that's not in USB (except scale).

Link to comment
Share on other sites

On moving to AIG warrants as a way of limiting exposure to financials...

 

There was a point in summer of 2011 when Benmoche said that a 50% drop in the equity markets would put pressure on their capital levels.  I never understood his comment as I didn't think they were all that exposed to the equity markets in the first place.  Does anyone else remember him saying that and the context?

 

do you have a pointer to the original speech/video?

 

No.  But I'm certain that it was Benmoche and that he said it.  It was in an interview that I saw a clip of.  It was never discussed on this board before.

 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...