For now, you have to do it by hand. Morningstar doesn’t carry it and other sites (in my opinion) are unreliable at best.

Where do you get the FCF info for financial companies? I don’t see them on Morningstar. Do you manually calculate them?

Thanks,

Kevin

I would never follow Buffett into or out of any position based on his thinking. As I said in this post about following gurus into or out of positions:

It’s a silly strategy that leads to losses because you may end up as that follower that made every wrong move.

>

(I also joked about shorting oil, going long in gold, and stuffing 50% of your portfolio under your mattress. That would have worked out really well!)

I’ve heard you say time and time again that Financial Institutions were outside of your sphere of confidence. What has changed? We all know that Buffet is betting big on Wells Fargo but is that a reason to jump in with him? He’s made some big bets lately such as GE and Goldman Sachs that some question, but look at the terms he received. 10% for 10 years seems like he is hardly taking a risk. I’ve been on the edge with WFC myself especially considering the fact that I can get in cheaper then his $20 entry point. But I continue to come back to the simple fact that I don’t understand the banks and after seeing what has transpired over the past 2 years, I’m going to say that nobody understood the banks, including the CEO’s who bought up these ailing institutions and invested in their own bank stocks at prices far higher then they are at now. Joe, I’d love to see some analysis here outside of an “If Come” bet. Remember, you can follow buffet in, but it’s a lot harder to follow him out. I’m going to leave you with one last thought, Mr Market has been equally as brutal on many many other strong companies. I think those arguments are par right now for all companies and really can’t be used as a compelling argument, as a bet on the S&P index could be made based on Mr. Market current mood. Why is WFC a better place to put your money the other companies, such as the ones that have been in your sphere of confidence?

I have been some serious reading on Wells Fargo’s annual reports and been doing some analysis on the companies financials and comparing among the other banks. I must say that thus far, I find WFC to be a solid bank. The issue I’m struggling with now is how do i put a value to the bank?

I have done a number of analysis for other non-banks (JNJ, PG etc etc) and typically I would use the cash flow model to calculate the intrinsic value. But for banks, I’m at a lost. Should I be using cash flow model or is there a more accurate or should I say practical way of calculating their intrinsic value.

I would greatly appreciate it if you can share your thoughts and how dud you calculate the intrinsic value of WFC. hopefully it won’t be a 20 pager as you describe in your post above …

Cheers.

Jojo

guess we all see value in different things, but we won’t even agree to invest on any one in particular just because we see value. (hope that makes sense).

BTW folks, Procter & Gamble at 55$ today, interesting indeed

A bank generally has $100 of loans for every $10 of shareholders equity. If mortgages are 50% of your loans ($50), your average down payment is 10%, and residential real estate is down 30% in value, you are vulnerable to losses of about 20% ($10) on your mortgage portfolio. If loan losses are $10 your equity is gone and your bank is a zero. It seems all banks today, including Wells, are facing this harse math.

Clearly Wells managment is better than most. What concerns me is that better than most my not have been good enough to survive this asset meltdown.

I think the Buffett/Graham quote most relevant to Wells is: “margin of safety – the most important three words in investing”. It is not clear to me yet what the margin of safety is in Wells…I look forward to the rest of your analysis on the subject.

Keep up the good work on the website!

1) The current spread in rates for mortgages placed now

2) The mortgage porfolio’s earning power once properly discounted for the unsustainable

3) The almost certain fact that the savings rate will ramp up (250-750B per year) and that money has to go somewhere. The x2 physical footprint could collect a lot of this, no?)