Jim Cramer on Wells Fargo & Company (WFC) CEO Charlie Scharf: ‘Turns Out Scharf’s Just Real Smart’
We recently compiled a list of the Jim Cramer on Taiwan Semiconductor, Netflix, and Other Stocks. In this article, we are going to take a look at where Wells Fargo & Company (NYSE:WFC) stands against the other stocks on Jim Cramer's list.
Jim Cramer, the host of Mad Money, recently expressed concern that some investors are overlooking potential market opportunities by fixating on the Federal Reserve's next moves regarding interest rates. He emphasized that, over the years, many in the investment community have become overly reliant on the Fed’s actions rather than focusing on individual companies and their profitability.
“Everyone who’s obsessed with the Fed’s next foray is basically investing with blinders on, and as a result, they’re missing out on some of the greatest moves I’ve ever seen in my life. Moves coming from the most unlikely of stocks. And I don't want to see you ignoring these opportunities anymore.”
Cramer said that he is an admirer of Fed Chair Jay Powell, but he recognizes the limits of the Fed's influence. He noted that while Powell wields significant power, he cannot dictate the performance of high-quality companies that are less affected by economic cycles. According to Cramer, when a company is not tied to the business cycle, it is less susceptible to the whims of the Fed. However, many traders still seem oblivious to this reality.
“... I needed to say something because over the past couple of decades, so many people in this business have become creatures of the Fed, not of companies and the profits that they make. Unless the Fed's happy… unless it has its pound of flesh, these Fed watchers won't pull the trigger and buy stocks, even stocks of companies have almost nothing whatsoever to do with our central bank and are doing really well.”
He highlighted that fear of the Fed often extends to stocks that appear pricey based on earnings multiples, particularly when investors worry that the Fed might have to abandon rate cuts to combat inflation. This fear, he noted, can drive investors away from promising sectors, like semiconductors. While Cramer acknowledges the importance of being aware of the Fed’s actions, he insists that it should not become an obsession. He believes that although the Fed has considerable influence, it is not all-powerful.
He clarified that he does not claim the stock market will never decline during periods of Fed easing, but he maintains that there are limits to the Fed's impact.
“I’m not saying the stock market will never go down when the Fed’s easing… I am saying there are limits to what the Fed impacts. And I swear by the managers who know a lot about business, and who don’t cower when Jay Powell grabs the mic to talk about the pace of rate cuts.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 17. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of bankers in suits, discussing the success of the company's banking products.
Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 83
Cramer said that the Charitable Trust owns Wells Fargo & Company (NYSE:WFC) and commended the CEO on his well-thought strategies. Here’s what he said:
“Then there's Wells Fargo. We've gotten a series of strong economic numbers of late, which makes the Fed watchers assume that we're looking at a series of slow and deliberate rate cuts. Nothing fast. Maybe we won't even get one in November.
What happens to Wells Fargo then? We own this for the Charitable Trust. And if you really believe the rate cuts will slow to a crawl, I think it's reasonable to be concerned. But what if, heaven forbid, the CEO set up Wells Fargo's portfolio precisely for this moment? And that's what CEO Charlie Scharf told us on Tuesday, we went up to see him. Turns out Scharf's just real smart. He figured this stuff out. You weren't levered to a group of Fed officials who were playing with dots… You're dealing with someone smarter than you are...”
Wells Fargo (NYSE:WFC) is a major global financial services institution, offering a range of banking, investment, mortgage, and financing solutions. With assets exceeding $1.9 trillion, the company plays a significant role in the financial sector.
On October 11, the company shared its financial results for the third quarter, reporting a net income of $5.11 billion. The figure marks a decrease from the $5.77 billion recorded in the same quarter last year, although it exceeded analysts' forecasts. Revenue for the quarter amounted to $20.37 billion, also down compared to the previous year, yet slightly above expectations. Additionally, the company has a history of returning excess capital to shareholders, highlighted by a 14% increase in the common stock dividend for the third quarter and the repurchase of $3.5 billion in common stock during this period. Over the first nine months of the year, the total stock repurchased exceeded $15 billion, which was a more than 60% increase compared to the same timeframe last year.
In an appearance on Mad Money on October 15, Wells Fargo’s (NYSE:WFC) CEO Charles Scharf discussed the current economic landscape. He noted a gradual rise in consumer spending across both debit and credit transactions and confirmed that deposit balances remain solid, with credit quality continuing to perform well. Scharf expressed admiration for the Federal Reserve, acknowledging its effective management of the economy amid challenging conditions.
While Scharf emphasized the importance of quarterly results, he remarked that the market tends to focus excessively on these reports compared to management’s perspective. He highlighted the stock’s performance, which fell after the previous quarter’s results but rebounded following the latest announcements, despite trends and business strategies remaining largely unchanged.
Overall WFC ranks 3rd on our list of the stocks Jim Cramer is talking about. While we acknowledge the potential of WFC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WFC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.