Wells Fargo: Still Not Cheap

| About: Wells Fargo (WFC)
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WFC remains in limbo as Warren Buffett refused to speak out.

Shares still aren’t cheap.

And activists are still pushing for change.

Wells Fargo (NYSE:WFC) is stuck in the mid-$40s. And it'll likely remain there until either Warren Buffett steps up and buys more shares or the company makes a more meaningful move to appease investors - activist investors included. As I've noted in the past, the WFC corporate culture is torted and will remain so until we see another major shakeup in the top ranks.

Warren Buffett, top WFC shareholder, has said that he thinks the problem is much bigger than Stumpf and that reigns true. CEO John Stumpf has stepped down from WFC, and his other board roles - at Chevron (NYSE:CVX) and Target (NYSE:TGT). WFC put COO Tim Sloan as CEO - not bringing in someone from the outside as would've been ideal.

WFC has been the major big bank outperformer over the last few years, thanks to its stronghold in the home financing market. The 15% fall in the stock for 2016 has been a minor setback and still not made the company an attractive investment.

Activist still at the gate

CtW Investment Fund, which is the advisor to the major pension funds, still has a big issue with WFC. The big catalyst could be a major board shakeup. CtW is pushing for two new board members on the WFC board. This comes as a new CEO doesn't simply fix the issues. Instead it's fresh blood and those with experience in 'human capital' that can help steer WFC in the right direction. CtW wants to see executives from companies that respect their employees - such as Costco (NASDAQ:COST) and Trader Joe's - on the WFC board.

Again, the answer might lie in improving the corporate culture. Which is tough to do when the company's COO is now CEO. The board needs some "fresh blood." The bank has had several years to handle, or at least prepare, for when the fraud came to light. The media started questioning its sales culture in 2013, and the questionable practices have been going on at the bank since 2006.

More to come - will it get cheaper?

More states, including NY and NC, are looking into WFC fraudulent sales practices. California has already cut ties and Connecticut has opened an investigation. The House Financial Services has opened an investigation. As well, we could see repercussions from WFC not revealing the fraud sooner. The SEC could come in and hit the company for not disclosing the fraud sales sooner. The board could pullback more compensation as well from Stumpf, after already pulling $40 million. He's still eligible for $120 million in compensation. The icing could then be private lawsuits as class action lawyers look to hop aboard.

Unfortunately, the fear is that the bank won't get any cheaper, even with all the overhangs. Warren Buffett, the largest shareholder, isn't going anywhere - where would/could he go? There're only so many public companies with market caps in the hundred billion dollar range. So WFC has an ally. But to what gets the stock higher? The major catalyst could be a shakeup of the board and the idea that the corporate culture is turning around.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.