Summary
- Bank of America
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WFC
Charlie Munger (Trades, Portfolio), the renowned investor and chairman of Daily Journal
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Also the vice chairman of Berkshire Hathaway
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While Munger’s Daily Journal has positions in four stocks, 13F filings show it did not make any significant changes to the holdings during the three months ended March 31.
Regardless, many investors are likely looking for opportunities to take advantage of in the current market environment and ahead of Berkshire Hathaway’s annual meeting in May. As a result, they could be interested in some of the stocks in the guru’s $161 million equity portfolio that are undervalued depending on an earnings-based discounted cash flow model.
According to GuruFocus portfolio data, current positions in Munger’s portfolio that have a margin of safety and high predictability are Bank of America Corp. (BAC, Financial), U.S. Bancorp (USB, Financial) and Wells Fargo & Co. (WFC, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Bank of America
Shares of Bank of America (BAC, Financial) are trading at a 72.50% discount to their fair value of $109.77 according to the earnings-based DCF model.
The bank headquartered in Charlotte, North Carolina has a $238.41 billion market cap; its shares were trading around $29.95 on Tuesday with a price-earnings ratio of 9.39, a price-book ratio of 0.98 and a price-sales ratio of 2.56.
The GF Value Line
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GF Value Line for Bank of America.
At 74 out of 100, the GF Score indicates Bank of America will likely have average performance going forward. The company received a high rating for GF Value, while profitability, growth and momentum were more moderate and the financial strength rank was low.
GF Score for Bank of America.
The company also has a predictability rank of three out of five stars. According to GuruFocus research, companies with this rank return an average of 8.2% annually over a 10-year period.
As of the end of the first quarter, Munger held 2.30 million shares of Bank of America, which accounted for 40.86% of the equity portfolio and his largest holding. GuruFocus estimates he has gained 103.16% on the long-held investment.
Munger’s holding history.
Of the gurus invested in Bank of America, Buffett has the largest stake with 12.63% of its outstanding shares. Dodge & Cox, Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Li Lu (Trades, Portfolio) and a number of other investors also have significant positions.
U.S. Bancorp
U.S. Bancorp’s (USB, Financial) stock is trading at a 24.68% discount to its DCF fair value of $46.32.
The Minneapolis-based bank holding company has a market cap of $52.31 billion; its shares were trading around $34.69 on Tuesday with a price-earnings ratio of 9.35, a price-book ratio of 1.21 and a price-sales ratio of 2.10.
According to the GF Value Line, the stock is significantly undervalued currently.
GF Value for U.S. Bancorp.
The GF Score of 74 indicates the company is likely to have average performance in the future, driven by high GF Value and growth ranks. The ratings for profitability and financial strength, however, were more moderate while the momentum was low.
GF Score for U.S. Bancorp.
U.S. Bancorp also has a four-star predictability rank. GuruFocus found companies with this rank return an average of 9.8% annually.
At the end of the first quarter, Munger held 140,000 shares, representing his fourth-largest holding with a weight of 3.14%. GuruFocus data shows he has lost an estimated 9.16% on the investment over its lifetime.
Munger’s holding history.
With a 1.03% stake, Chris Davis (Trades, Portfolio) is U.S. Bancorp’s largest guru shareholder. Other top guru investors include First Eagle Investment (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Buffett, Mairs and Power (Trades, Portfolio), Hotchkis & Wiley, Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Yacktman Asset Management (Trades, Portfolio).
Wells Fargo
Generating a DCF fair value of $43.57, shares of Wells Fargo (WFC, Financial) are trading with a 5.28% margin of safety.
The bank, which is headquartered in San Francisco, has a $158.28 billion market cap; its shares were trading around $41.35on Tuesday with a price-earnings ratio of 11.85, a price-book ratio of 0.98 and a price-sales ratio of 2.05.
Based on the GF Value Line, the stock appears to be fairly valued currently.
GF Value Line for Wells Fargo.
Like the two other banks, the company is likely to have average performance in the future due to its GF Score of 72. It raked in middling marks for all five criteria.
GF Score for Wells Fargo.
It also has a 3.5-star predictability rank. GuruFocus data shows companies with this rank return, on average, 9.3% annually.
Munger held 1.59 million shares of Wells Fargo at the end of the first quarter, which occupied 36.96% of the equity portfolio as his second-largest holding. GuruFocus estimates he has lost 4.56% on the investment so far.
Munger’s holding history.
Dodge & Cox is Wells Fargo’s largest guru shareholder with a 3.10% stake. The stock is also being held by PRIMECAP Management (Trades, Portfolio), Davis, Hotchkis & Wiley, Richard Pzena (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Bill Nygren (Trades, Portfolio) and a number of other investors.
Disclosures
I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.
Source: https://www.forbes.com/sites/gurufocus/2023/04/21/3-undervalued-bank-stocks-in-charlie-mungers-portfolio/