The financial sector got hammered yet again. Shares of Wells Fargo (WFC), one of Warren Buffet’s favorite banks, and a large holding of the Berkshire Hathaway portfolio has also been hammered. Today it went down as far as $23.96 at one point!
Like Warren Buffet & Benjamin Graham (Buffet’s teacher) stated, the intrinsic value calculation is only an approximation of the true value. Everyone’s calculated intrinsic value will be different. So use conservative numbers and be a bit realistic!
From all the usual metrics and intrinsic value calculations, WFC looks to be very cheap with a good margin of safety!
How far off is my intrinsic value calculation?
Buffet would have slightly different reasons and prices for buying than we would. But I do know he is a value investor, and also performs simple intrinsic value calculations as well. Based his past purchases, there is a great chance that it isn’t far off. His recent purchases of WFC were :
– 2007Q2 (~$33.07)
– 2007Q3 (~$34.90)
– 2007Q4 (~$31.60)
– 2008Q1 (~$29.10).
Each quarter I am pleasantly surprised he acquired WFC as predicted based on what we see with the calculated intrinsic value and other metrics. But as a small individual investor we may need to demand a higher margin of safety than he would, and hence lower purchase prices.
For all you followers of WFC, calculate your intrinsic value & margin of safety (among other numeric metrics). Read up on the company to see how they are doing. WFC may an investment that has reached a suitable price for you!
Thanks & Happy Investing!
The Investment Blogger
Let me know if you liked this article, or if there is something you want me to write about next time.
Don’t know how value investing works? I always recommend reading Intelligent Investor by Benjamin Graham as good starting point. I posted links to the exact edition that I read and recommend: