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Why I Just Sold My Wells Fargo Position

15 May 2008 2 Comments

With the financial sector taking a plunge over the last six months, I figured it was a decent time to pick up a financial. After all, I didn’t own a bank in my portfolio, so it seemed to make sense. Wells Fargo seemed to be a bank that had minimal sub-prime exposure, so that was my choice. I bought a small position in Wells Fargo (WFC). Today, not too long after I bought my position, I decided to sell.

An Analysis of My Investment Goals

After doing a routine analysis of my portfolio, I decided that the only reason for owning Wells Fargo in my portfolio was for the sake of diversification. Well, if you’ve read other posts on this blog, you know that diversification is NOT my goal. My goal is to outperform the market.

A Better Choice

I have read a good bit of material on the state of the U.S. financial sector. After experiencing a very long bull run of approximately 20 years, many experts think that the run has ended. Many are predicting banks to be underperform for some time. Why hold an investment that is going to underperform simply for the sake of diversification?

Furthermore, if you add the increasing complexities surrounding financial instruments these days, it is next to impossible to value these financial institutions. I’d rather stick with companies that are easier to understand and easier to value.

One position I am definitely adding to is Philip Morris International (PM). Talk about a company that is easy to understand. They sell cigarettes, and they do it very well. Check out my previous post on why I like PM so much.

The other position I am looking to start building is in the WisdomTree Dreyfus Chinese Yuan Fund (CYB). I recently wrote an article on this new ETF.


The bottom line is that my goal is to build positions in investments poised to outperform the market. If these positions result in a diversified portfolio, great. If not, that’s also great. I’m skeptical on the U.S. Financial sector and have other positions I’d rather my money be invested in.

Maybe your portfolio and investment goals need a thorough examination?

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  • chris said:

    so you are unconvinced by the “financials will lead the next bull rally” argument? Especially because of the feds action that has ignored inflation, shouldn’t that be beneficial to financials? buffet said he felt wells fargo has increased intrinsic value despite the depressed stock price. I currently don’t own WFC, but I have it on my watch list.

  • James said:

    Well, you hopefully made a quick 2% today…