Wells Fargo Is Over Valued at $25.70
Well that is what 
I feel and that is why I end up with a short position on Wells Fargo at the end of today’s trading. Well Fargo is the stock that I love and hate. I love it because I personally bank with Well Fargo for more than 10 years and I believe it is indeed providing high quality of services to customer. Wells Fargo acquired Wachovia and Warren Buffet recommended Wells Fargo more than one times in public as the best bank worth to invest. I recalled that was when its price was at around $8 and $20.
I hate it because it is the very single stock that caused me to lose over $9,000 in a single day and wiped out my three months of hard work. Yes just last Friday before I started this blog I took 3000 share of short position at $24.76. It was the day after Wells Fargo announced offering new shares at about $22. My reason behind this was new share sold at $22 and lower there was no way that it could be trading at 10% higher than the offering price given that Wells Fargo was traded lower than $22 just a few days before the offering. I was right in the early morning on 5/8. It ever went down to $24.45 but after that it went straight up to $28. I was nervous because I was highly leveraged when shorting these many shares. After keeping it over the weekend I covered the short position on early Monday 5/11 losing more than $9,000. Looking back if I were to keep it a couple days longer and cover it yesterday at close I could have made handsome profit.
The lesson I learned from this is that I have to have discipline in trading. I shouldn’t have put all my leveraged bet in a single shot even a good entry price is identified. If I were to short 500 shares instead of 3000 shares I wouldn’t have problem to keep it for a week.
Anyhow passed is passed. One of the purposes that I setting up this blog is to remind myself that the public is watching me and I can not behave like crazy gambler. I have to have discipline and I have to be persistent with it.
I made some trades on USB today and my account balance is up. Again I am going to keep my short position on WFC over night to see what happen. See you tomorrow!
Account Balance Change: +333.77
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Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
Thanks Allen!
STB,
IMO don’t think WFC is overvalued but I do think the volatility we have seen in the banking sector will shrink. WFC options are ridiculously expensive. Long term WFC has tremendous earning power and the stock will rise considerably in the coming years. In the short term it may be overbought. I don’t really care. I’m a long term holder and will own it for the next 5 years or more. I see this as an opportunity to sell options against the stock. I recently sold June 28 calls @ 1.60 and I am willing to risk having some shares called away at 28.
My other interest right now is a purchase of WMB. My basis is around $14.50 a share. WMB has a lot of asset value. WMB has 15000 miles of pipeline and rights to trillions of cubic feet of natural gas. WMB could be liquidated and the assets would be very close to the current share price. I see this as a long term play against cap and trade and other ill conceived global warming legislation. Natural gas is a carbon clean energy. This will increase demand. I see WMB returning to $40 within 3 years. There are a few other ways to play the increase in demand for natural gas, but I think WMB is the safest because of it’s asset value.
Hi Bob congratulation! You are the first commentator on my blog. Thanks for the tips. I have no doubt that Wells Fargo will be a great long term investment in the coming years. But it is all about opportunity cost. I feel I can make more profit trading here and there rather than holding it. And you actually got me interested into something I never touch. That is option trading.
Now I understand why there are people willing to pay for $25 a share for Well Fargo which is way over its new offering price because there were people willing to pay for its call option with strike at $28. However I just checked Wells Fargo’s option and there seems no volume on June call with strike at $28. And I don’t think people will buy it at $1.60 now because June call with strike at $27 is sold at $1.40. I am going to check out WMB also.
Thanks for commenting