Wells Fargo Keeps Rolling

In This Issue: Wells Fargo Keeps Rolling How to Play the World's Economies   How the Internet Will Transform Your Life Yet Again The Internet is going through another change that will rock your everyday life – again. It's a new wave in Internet capabilities led by cloud-computing technologies. Businesses are starting to use the cloud at breakneck speeds. Barron's estimates cloud computing will soar by 44% a year. McKinsey & Co estimates a $6.2 trillion impact by 2025. That's just one leg of the wave. There are three more that are detailed here. Plus, here are 4 ways to profit from the wave. Click here. Wells Fargo Keeps Rolling 8/21/2014 By Thomas Scarlett The last seven years have been brutal for the banking business. But at least one major American bank has managed to steer a steady course amid all the turbulence: Wells Fargo & Company (NYSE:WFC). Now the industry is changing rapidly, due to new technologies that allow customers to dispense with in-person banking entirely. Already some banks are advertising that they can offer better rates because they don't have branches at all. Does Wells Fargo have a strategy to adapt to this new world? The answer is yes. The company's earnings reports have generally been solid if unspectacular, and the most recent one was no exception. The San Francisco-based bank reported net income of $5.7 billion, or $1.01 per share, for second quarter 2014, up from $5.5 billion, or $0.98 per share, for second quarter 2013. For the first six months of 2014, net income was $11.6 billion, or $2.06 per share, up from $10.7 billion, or $1.90 per share, for the same period in 2013. Wells Fargo has now posted 16 straight quarters where profit was up, year-over-year. It is the fourth-largest U.S. bank by assets and has been in business for more than a century. "Our strong results in the second quarter reflected the benefit of our diversified business model and our long-term focus on meeting the financial needs of our customers," said Chairman and CEO John Stumpf. "By continuing to serve customers we grew loans, increased deposits and deepened our relationships. Our results also reflected strong credit quality driven by an improved economy, especially the housing market, and our continued risk discipline." Management is committed to both maintaining strong capital levels and returning more capital to the shareholders. In the second quarter the company increased the common stock dividend 17 percent and repurchased 39.4 million shares. Chief Financial Officer John Shrewsberry said, "The primary drivers of Wells Fargo's business remained strong in the second quarter, with broad-based loan growth, increased deposit balances, and improved credit quality. Wells Fargo has generally focused on meeting the needs of its consumer, small business and commercial customers, leaving the more volatile aspects of the financial world to other entities. But the Wall Street Journal recently reported that the company has set a goal of doubling the size of its asset-management unit to $1 trillion over the next 10 years. Managers plan to do this through acquisitions and more aggressive sales to big investors. The firm has been increasing its international sales force and trying to buy smaller asset managers to broaden its product offerings, according to several executives. The 21st-century incarnation of the bank is the result of a 1998 merger between San Francisco-based Wells Fargo & Company and Minneapolis-based Norwest Corporation. Although Norwest was technically the surviving company, the new bank called itself "Wells Fargo" because the name has been well-known in American business for more than a century. Since the stock market plunge of 2008, some investors have been skittish about investing in the banking sector, particularly institutions that do a lot of mortgage business. The mortgage industry will always be associated in the minds of this generation of investors with the worst financial meltdown since the Great Depression. But Wells Fargo weathered the storm better than most and came out on the other side with a solid position in several markets. It remains one of the nation's top mortgage lenders and is poised to reap handsome rewards as the nation's housing sector continues its recovery. Its consistent earning record is even more impressive when you recall that it was achieved against the backdrop of the housing collapse of 2007-2010. Wells Fargo Home Mortgage customers with a Home Rebate Card have used their rewards to pay down $50 million in mortgage balances since the card's launch in 2007. Virtually every purchase a customer makes with the card counts toward rebates credited to the principal on their Wells Fargo Home Mortgage loan. Between 2010 and the first quarter of 2013, Wells Fargo managed to double its return on assets. What this means is that over the past three years, the company has doubled its effectiveness at generating fresh profits from its lending activities. And yet the bank's price-to-earnings (P/E) ratio hovers at around 11, perhaps because investors see the mortgage industry as inherently volatile. But if any company has shown it can be consistently successful in this market, it's Wells Fargo. The stock is a buy below 53. Thomas Scarlett is an investment analyst at Personal Finance and its parent website, Investing Daily. The New Golden Age for Profits Over the past 40 years, small-cap stocks have delivered 175% better gains than large caps. And that trend is intensifying. In the '80s, small caps began to pull away from larger caps. In the '90s, the separation only increased. But in the 2000s, the gap really exploded. By the end of the decade, $1 invested in small caps had turned into $88. Compare that to $32 for large caps. This trend is intensifying – with no end in sight. Small caps now outperform large caps by a whopping 352% – and climbing. To jump on this profitable growth trend, click here. How to Play the World's Economies 8/19/2014 By Richard Stavros Hedge your bets. If the International Monetary Fund gave investment advice, that might be its three-word recommendation. Late last month the IMF predicted the Eurozone's contracting economy would grow at an anemic 1.5% next year. Meanwhile, it revised the U.S.'s growth downward by 1.1% percentage points to 1.7% for 2014, but said it would rise to 3% in 2015. Our own take: We're cautions about the U.S. recovery given retail sales stalled in July and wage growth has failed to surpass the inflation rate. The Chinese economic engine, the world's No. 2 economy, will expand 7.4% this year, according to the IMF. That's good news for the globe, but we're less optimistic than the IMF about China. Data from China shows financial activity slowed down in July: New lending declined 86% in July from June, the slowest rate of credit expansion since Lehman Brother's crashed in 2008, according to economists interviewed by the New York Times. And July new home sales in China fell 17.9% from a year earlier and 28.2% from June. China's second quarter uptick is likely an "aberration" and the Chinese government's stimulus isn't enough to offset skittish banks from pulling back lending to "bigger, riskier borrowers," the Times reported. And if China should fail in its stimulus efforts that could mean an unexpected drag on global growth. The only bright spot continues to be emerging markets. The IMF projects that annual growth will be 5% per year over the next five years. That's strong, but down from an average of 7% growth from 2003 to 2008. Of course it's tough to pick which developing region or country will be the next to take off economically. Overall, the IMF expects the global economy will likely expand 3.4% this year, a cut of 0.3% percentage points from April's estimate, but still an improvement from 3.2% in 2013. The lack of strong growth in developed countries, despite very low interest rates and other stimulus might mean "global growth could be weaker for longer," the IMF said in its report. Investors can be forgiven for being weary of the uneven pace of the global recovery, and the volatile markets that go with them. The world's economic leaders seem like they're in the business of revising their forecasts downward, and coming up with new reasons why a recovery is always just around the corner. We had just such uncertain situations in mind when we developed portfolios for Global Income Edge. We hedge your bets for you by recommending companies with operations mainly based in stable developed countries, and with operations across a broad range of developing nations. In this, our first Income Without Borders, we look at two health care companies that span dozens of countries and have pricing power and demographic winds at their backs to continue to pay high dividends. Richard Stavros is Chief Investment Strategist of Global Income Edge This article originally appeared in the Income Without Borders column. Never miss an issue. Sign up to receive Income Without Borders by email. Oil Imports Plunging – Here's How to Profit Oil imports recently fell to their lowest level since 2010. And they're forecast to fall even further in the coming years. That's all thanks to the fracking revolution taking place around the country. I've found six companies that form the backbone of the oil and gas industry – yet not a single one of them owns a well. They're up six times more than the S&P 500 this year and have handed a select group of investors gains up to 511%. I show you why – and how you can get in on the action – when you click here. You are receiving this email at benjamart.ss.stock@blogger.com as part of your subscription to Investing Daily's Stocks To Watch, published by Investing Daily. To ensure delivery directly to your inbox, please add postoffice@investingdaily.com to your address book today. Email Preferences | About Us | Premium Services | Contact Us | Privacy Policy Copyright 2014 Investing Daily. All rights reserved. Investing Daily, a division of Capitol Information Group, Inc. 7600A Leesburg Pike West Building, Suite 300 Falls Church, VA 22043-2004 U.S.A.