Trade Tracker: Richard Saperstein buys Wells Fargo

Core Viewpoint - The financial sector is currently underperforming, with a noted decline of 1.5% this month, but there are opportunities for growth, particularly with Wells Fargo and JP Morgan due to favorable economic conditions and regulatory changes [1]. Group 1: Company Performance - Wells Fargo is seen as a strong investment opportunity, expected to benefit from increased loan demand and transactional volume due to deregulation and lifted asset caps [1]. - JP Morgan has a return on tangible common equity of approximately 15-16% and is actively buying back stock, indicating strong financial health [2][5]. - The stock of JP Morgan is considered undervalued, trading at 15 times this year's earnings estimates, with potential for multiple expansion to 17.5 times next year's estimates [5]. Group 2: Market Position and Valuation - JP Morgan is highlighted as a potential candidate to reach a trillion-dollar market cap, being the only large bank in the portfolio of some investors [4]. - The valuation metrics for JP Morgan, including the ratio to book value and return on tangible common equity, suggest it is an attractive investment compared to other banks [3]. - Wells Fargo is noted for its recent price movement, having just surpassed its February high, indicating potential for further growth in the near term [6]. Group 3: Analyst Insights - Analysts express confidence in Wells Fargo as a faster mover in the short term, while JP Morgan is expected to maintain a larger market presence and premium valuation in the long term [7][8]. - Concerns have been raised regarding Berkshire Hathaway's recent downgrade, with analysts pointing out issues such as peaking margins and lower investment income, which could impact future performance [8][9].