Side Gig and Thoughts on Wells Fargo

Hi everyone,

I wanted to apologize for taking some time off from writing.  Things are very crazy in my life right now, and unfortunately the blog has been the lower hanging fruit that had to be put on pause for a bit. That said, I wanted to put out a few quick notes:

First, I took on a second job (a side gig, if you will), which should help boost income (at least a little), and to be honest, it is much more profitable than blogging, which was really only a few dollars per month!...Hence the lack of articles lately.  We'll see how things go over these next few months, but I anticipate that writing will be lighter up until the new year, when I will once again have more free time and can return to bi-weekly articles.  Until then, I still will publish the following:

* Monthly Passive Income Reports (September will be published in a few days. Very interesting, and frustrating month!)

*Monthly Income/Expenses Reports

*Q3 Review

* Yearly Review

*2017 Goals

*Perhaps one or two additional articles

Please stay with me through this brief transition!


Secondly, I wanted to offer my thoughts on what has happened with Wells Fargo recently.  As many of you know, I initiated a position in the stock at $48.50, watched it go up to 50, only to have some very negative news about opening fake customer accounts to boost their cross-selling of products hit the headlines and greatly hurt the stock. Then, a few days later there was even some Congressional pressure for the CEO to step down.  The stock is now trading around $45.  Here's my take:

Though I like Wells Fargo, I like it less now, but I still think the valuation is attractive.  Here me out for how that can make sense.  "Clearly recent headlines surrounding retail banking sales practices at WFC are a black eye for a company with a great long-term fundamental track record; however, we think the market's extraction of ~$25B in WFC market value related to a $2.6M revenue loss to be excessive," said one analyst at Baird.  I agree.  It is a complete overreaction; as the numbers themselves prove it.  You have to multiply 2.6M times almost 10,000 to get 25B.  That seems harsh.

Still, I find it frustrating that as an investor with no knowledge of these practices going on, that I now have to wait for the stock to recover at least to $48.50 for me to exit without a loss.  That is frustrating, and to be honest, a bit unfair.

Or is it?

I decided to enter into a sole position (i.e. a single stock) and therefore I assume all "specific risk", or diversifiable risk, in the company that I choose.  I happened to choose WFC slightly before somewhat of a scandal.

And herein lies the point of why I prefer mutual funds for the majority of my holdings.  With a market index fund, I can diversify away all risk (such as a Wells Fargo retail banking scandal) and only have systematic risk remaining.

Sure I like WFC and think it offers a healthy return at current prices.

But is there another scandal going on that hasn't been found out yet?  Could this happen to ANY company and eventually cause the dividend to be cut or decreased?

The answer is yes.

Diversify your income streams is my takeaway lesson thus far in this trade.  Sometimes firm-specific risk is greater than what it seems.

Thanks for reading,

Passive Income Dude

Recent Buy: WFC

For those that follow my Portfolio, you may have noticed that after last month's update my cash position actually became my 9th largest holding (out of 17) due to my sale of American Electric Power for a total return of 24% and my strong belief that the stock market is overvalued mostly.

9th out of 17 is relatively high for a cash holding, and so I recently wrote towards the end of July about considering Wells Fargo as one of the few remaining high quality, value purchases out there.  I still believe this to be the case and consequently acted.

Over the last week or so I had watched the stock move sideways in a tight 48.5 range (shown below) for about five trading days or so, and I knew that I had to pull the trigger if I was going to do it.

I thought the stock was definitely going to move one way or the other (to be honest I wasn't certain it'd be up!), and I missed my opportunity to get it in the high 47s earlier in August, (though I did mention in my article that it might drop into the 47s).  Anyway, in the end, I purchased it right before its most recent jump into the 50s. Here are the details of my trade:

# of Shares Purchased: 87
Purchase Price: $48.60
Yesterday's close price: $50.80

Thankfully I got in before this recent pop in share price as shown below, though I don't think it will stay as high as it is now nor do I intend to sell anytime soon, so it is basically a mute point. Nonetheless, I still think WFC is valued in the Low 60s, high 50s, giving me sufficient cushion at the stated entry price.  Add to that a 3% yield, and increasing rate probabilities and you've got a pretty good total return I think.

What do you think? Often I stay away from financials. I know many have recommended Canadian banks, which I have not acted upon yet but am definitely interested.

Thanks for reading!

Passive Income Dude

Considering Wells Fargo (WFC)...

Does anyone else have Wells Fargo (WFC) on their radar as a potential buy?

For those of you who saw one of my recent "Time to Sell" articles, I just sold American Electric Power (AEP)  at a (thankfully) 17.9% annualized return; thinking it was pretty overvalued around $69 a share.

With that sell, I have some capital available to deploy, and am strongly considering Wells Fargo.

I've never really owned a bank stock in my dividend portfolio, and I tend to stay away from the Financial sector, almost always, but I think WFC deserves a look.  In fact, I should have bought WFC a long time ago back at like $28 (or something like that) a share when Warren Buffet made it one of his big holdings in Berkshire Hathaway.

Well, guess what - I just found out that Buffet bought even more a few months ago and now owns 10% of the company, making him their largest shareholder.

At around $48 a share, it has the following characteristics that make me strongly consider it: