Dorsey: Two Simple Reasons to Own Wells Fargo
Two advantages and a compelling valuation make this bank worth holding, says Morningstar's director of equity research.
Pat Dorsey: Hi. I am Pat Dorsey, director of equity research at Morningstar. I've been addressing some big picture topics in the videos recently: profit margins across the economy, trends for the broader economy coming out of earnings season. So I thought it will be a little bit fun to change things up this week and just talk about a stock that I happen to like and that I happen to own, Wells Fargo. And there's two reasons I like Wells Fargo, and I own Wells Fargo, and they are pretty simple: cheap deposits and cross selling.
First of all, Wells Fargo is able to basically source money cheaper than just about any another large bank in the United States. Their cost of funds in the second quarter was about 77 basis points, which they then turned around and lent out at about 5.1%. So basically, their cost of funds was under 1%, it turned around and lent that out of 5%--and that's pretty good.
Pat Dorsey does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.