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Wells Fargo Makes Its Quarter – So What? This is a Stock for the Long Term

Jeff Bailey

Wells Fargo (WFC) beat expectations for the fourth quarter, reporting net income of 91 cents, but, really, who cares? Flyspecking the bank’s quarterly results is a way to keep busy, I suppose, and some were wringing their hands about the earnings report before it came out. But it’s the long-term competitive advantage Wells Fargo has built for itself that attracted Berkshire Hathaway's (BRK-B) Warren Buffett as a huge shareholder and that has led YCharts’ Carla Fried and myself to write admiringly of the bank on at least four separate occasions.

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WFC Return on Assets Chart

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Interest-rate trends, no doubt, will at times challenges Wells Fargo. And economic dreariness will hold back its progress, for sure. But big banks have fabulous franchises and none exploits the position as smartly as Wells Fargo. You can read our coverage of Wells Fargo here and here and here and here.

Wells Fargo, as you can see from the above return-on-assets chart, kicks the stuffing out of the other big banks – JPMorgan (JPM), Bank of America (BAC) and Citigroup (NYSE:C). Yes, Wells Fargo, too, has done huge deals, but it sets itself aside by actually running its business with rigor. Much like Southwest Airlines (LUV) and United Parcel Service (UPS). These companies focus on incremental improvement, cutting costs a little here, getting a customer to do a little more business there, and they measure the efforts. In the end, it beats companies that swing for the fences and aim for transformational strategies.

Wells Fargo trades at a PE ratio of a mere 11 these days, with a dividend yield of about 2.5% and a low payout ratio, suggesting dividend hikes are coming.

Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at editor@ycharts.com.

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