Wells Fargo stock getting ready to roll

The lender is well-positioned to be the best repository of homes when people realize that mortgage rates are done dropping and the scramble for housing begins.

By Jim Cramer Dec 6, 2010 9:57AM

jim cramerIf Wells Fargo (WFC) takes out $29, you know what? It will be ready to roll. And I think you want to be there. Here's why.


The reportorial coverage on homes, as I have told you again and again, is very weak. Those of us who follow this industry closely and are involved in real estate are relatively amazed that the reporting is bad.


It hadn't mattered much. The stocks connected with housing had done nothing at all. Until now.


Last week we saw a big move in Home Depot (HD) and Lowe's (LOW). I think that's the beginning of something, as they have often signaled a potential move in homes. And we got the record pending home sales numbers that bearish investors completely ignored in a way that was almost pathological, if you ask me. I would have fired some people over this stuff in the old days when I had that capability.

So if pending home sales are going up and my two favorite indicators -- HD and LOW -- are turning up, it is time to figure out who owns the most unencumbered homes, the ones with the most documentation, the ones that are free to trade.


It sure isn't the homebuilders. Outfits like Pulte (PHM) and D.R. Horton (DHI) have really scaled back. Lennar (LEN) is busy buying distressed real estate.


It isn't most of the banks. As much as I like Bank of America (BAC) and JPMorgan (JPM) for their value and excellence, respectively, the winner in this case is Wells Fargo.


Bank of America owns Countrywide, which we know is a first-class disaster. JPMorgan bought Washington Mutual, and the people at WaMu were idiots. I am being nice to say that, because it means they shouldn't be prosecuted. They were just stupid.


Citigroup (C) is not levered to mortgages. It is more levered to international business.


That leaves Wells Fargo. While the underwriting standards dropped at every bank, WFC at least (1) is acknowledged as having done the fewest no-documentation loans and (2) has a legacy portfolio from Wachovia/Golden West  that, while done with terrible terms (pick no pay, ha!), is worth a great deal if housing prices come back up.

In other words, WFC is the repository of homes for when the scramble to buy homes begins. WFC is already the most aggressive lender. It has taken advantage of its newfound market share to aggressively expand its markets. That means it has the inventory and the underwriting capacity to really go to work when the public realizes that rates are done going down.


Throughout this period we've had to hear endless chatter about the homebuying credit and how that stole new-home sales. The numbers last week are saying that might no longer be true. More important, the low rates haven't meant much, because "everyone" knows rates are going lower.


I believe when they stop going down you are going to see a rush from the sidelines, emboldened by people who have made money in the stock market and feel better about the tax code certainty that is about to occur.


All of this cuts to wanting to have as many houses under your command as you can.


That's Wells Fargo.


Later in the day I will try to come up with a good call strategy on RealMoney.com to take advantage of this scenario. But I feel it is time.


I haven't liked this stock much, given the hatred the market has for the banks. But this unencumbered portfolio of homes and whole loans owned by WFC that were not purchased is about to go from a liability to a positive.


And it is going to happen very fast.


At the time of publication, Cramer was long Bank of America and JPMorgan.


Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.


Follow Cramer's trades for his Charitable Trust.


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Dec 6, 2010 11:33AM
JP M Chase  for their value and excellence...

JP Chase is about to lose a major block of customers they BRIBED with $100 to sign up now that they are cancelling the FREE part of their checking accounts!


All checking accounts go to $12/mo unless you want to turn over  E Deposits to them.


When they were WAMU I never really trusted them.  Having had issues with CHASE in the past,  I still wont trust them.


I guess I will start doing without a local bankup bank and stick to my credit union 100% now out of state.



Dec 6, 2010 12:05PM

Warning Dont Mortgage your Home with Wells fargo! They told the Appraiser to undercut my real Property Value by over half! then in thier records they had the real value of $479K while only showing $258K so my loan was 82% brackett. causing the payments to be more than double and refused to give me insurance to save my family home of over 14 years with 22 acres on Hwy 99 frontage 3084 sq ft. River views beautiful. they robbed me and my family. they recieved over half thier money back in penalties in 4 yrs then took it after making us sell every piece of land we had to save it. Wells Fargo Cheated me n my children. then 8 days after they got the 25 billion dollar bailout which was supposed to be for the little man, they sold my house! So Be warned It COULD HAPPEN TO YOU TOO! IF YOU CHOOSE WELLS FARGO AS YOUR LENDER! TRUE STORY

Dec 6, 2010 12:50PM
Like many others, I'm frustrated that the banks, who brought this crisis to a head and then relied entirely on the Fed to survive, have not done more to directly assist the recovery.   While I agree with Jim on the fundamentals (and his column after all is about money and not politics), I can only hope for the day when owning american bank stocks is the morale equivilent of owning a blood diamond stock.
Dec 6, 2010 11:47AM

All the banks (C, BAC, GS, JPM, WFC, etc.) are in deep dodo because they perpetuated  the housing fraud on all of us.  The only thing they're good for is storing spare change at 0% interest and electronic bill payment.  The FED is trying to get all of us to bail them (Banks and FED) out of their big scam.  Don't do it.  If anything short the banks.


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