Tags: Buffett | Wells | Fargo | Bank

Buffett: Wells Fargo Best Bank to Buy

Monday, 27 Feb 2012 10:11 AM

Legendary investor Warren Buffett says if he had to pick one bank stock, it would be Wells Fargo.

Buffet also owns stock in Bank of America, but if he had to match the two — Wells Fargo wins.

"I would say that if I had to just own one bank, I would probably own Wells," Buffett tells CNBC, adding he already owns "well over 7 percent" of the company.

"What Wells has done very well is to sell a wide variety of services to a huge deposit base. The biggest single asset that Wells has is its deposit base, as is true at the Bank of America," Buffett adds.

"They have a consumer-based, small-business type of base that's just huge, moreso than will be the case with Morgan or Citigroup. That's a terrific asset."

Focusing on the banking sector, Buffett says banks aren't going to boast as good a return on equity in the future as they did five years ago.

Tougher capital requirements have crimped lending but the quality of assets make bank stocks healthy even if returns won't be stellar. "Their leverage is being restrained for good reason in many cases," Buffet says.

"It's still a good business, and the American banks are really probably in many cases in the best shape they've ever been in," Buffett says. "Around the world banks are not in good shape, but the American banking system has had a remarkable comeback in the last three years."

Bank of America, meanwhile, has been good to Buffett's investment vehicle, Berkshire Hathaway.

Bank of America CEO Brian T. Moynihan has done such a good job turning the bank around that it will benefit Berkshire Hathaway's $5 billion investment in the financial institution.

"Our warrants to buy 700 million Bank of America shares will likely be of great value before they expire,” Buffett, chairman and chief executive officer of Omaha, Neb.-based Berkshire, writes in his Feb. 25 annual letter to shareholders, according to Bloomberg.

Moynihan has overseen 30,000 job cuts, sold $33 billion in assets and scaled back mortgage lending last year, while the stock is up 42 percent this year, the best performer in the Dow Jones Industrial Average, after posting the biggest decline in the 30-company benchmark in 2011, Bloomberg adds.

"Some huge mistakes were made by prior management," Buffett writes. "Brian Moynihan has made excellent progress cleaning these up, though the completion of that process will take a number of years. Concurrently, he is nurturing a huge and attractive underlying business that will endure long after today’s problems are forgotten."

Editor's Note: Use This Single Loophole to Pay Zero Taxes in 2012

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2012-11-27
Monday, 27 Feb 2012 10:11 AM
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