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I believed that Wells Fargo & Co. was recognized as a top bank. Why hasn’t its stock done better?

The possibility that every major bank might need additional money from the federal government if credit losses deepen during the recession is weighing heavily on the banking industry.

All banks with more than $100 billion in assets will be required under the Treasury’s financial stability plan to submit to a financial "stress test" to determine if they have enough capital to continue lending.

Wells Fargo shares are down more than 50 percent this year following a decline of 2 percent last year. The fear that shareholders could see their holdings diluted and dividends cut because of government bank-rescue efforts is a drag on Wells Fargo stock, as with many bank stocks.
Wells Fargo recorded a net loss of $2.55 billion in the fourth quarter when it added $5.6 billion to its reserves to cover future loan losses and prepare for its Wachovia Corp. acquisition completed at year’s end. The Wachovia deal made Wells Fargo the fourth-largest U.S. bank by assets.

Some investors are concerned that credit quality of Wachovia assets is much lower than expected. Upon the Wachovia deal’s completion, Moody’s Investors Service downgraded Wells Fargo’s senior debt rating by two notches, to Aa3, with a negative outlook, which means it could lower it again.

Still, according to Thomson Financial, analysts’ ratings on Wells Fargo shares consist of two "strong buys," seven "buys," eight "holds," one "underperform" and three "sells."

Can I expect better results from my shares of Ariel Focus Fund?

The large-cap fund with a concentrated portfolio of 23 stocks looks for enduring franchises that have strong cash flow and solid balance sheets.

It wants to buy those stocks on the cheap. Turnover is low, with stocks typically held three to seven years. But it isn’t operating in an upbeat environment for any stock strategy, and recent results have been painful.

The $25 million fund is down 40 percent over the past 12 months to rank around the midpoint of large value funds. The three-year annualized decline of 14 percent puts it in the lower one-third of its peers.

"We recommend this fund for the value niche in an individual’s portfolio," said Michael Breen, analyst with Morningstar Inc. in Chicago. "It has potential for short-term volatility, but we’re confident in the long-term results and stock-picking ability of its managers and analysts."

Portfolio managers Charles Bobrinskoy and Timothy Fidler have run this fund since its June 2005 inception. In the market downturn, they’ve especially been interested in dominant niche stocks such as Illinois Tool Works Inc. and fallen growth stocks such as eBay Inc., Tiffany & Co. and Dell Inc.

"If you’re looking for a broadly diversified, market-mirroring fund, this isn’t it," said Breen, who doesn’t recommend it as a core holding. "It is an active stock-picker’s fund that doesn’t have a lot of names."

The no-load (no sales charge) fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.25 percent.

If Southwest Airlines Co poor credit personal loans. is so great, why haven’t my shares done better?

The discount carrier lately has experienced some dubious firsts:

—"…It recorded its first quarterly net loss in 17 years in last year’s third quarter, followed by another net loss in the fourth quarter. Besides the lagging economy, its previously successful strategy of using futures contracts to hedge against rising fuel prices became a money-losing proposition when oil prices collapsed.

•It will not increase the size of its fleet this year, the first year it has not done so. Seating capacity is being reduced by 4 percent, and it sold some planes so it could lease them back and raise additional cash.

Shares are down 17 percent this year following declines of 29 percent last year and 20 percent in 2007.

However, Southwest features a good on-time-flight record, solid customer loyalty and one of the strongest financial positions in the airline industry.

Its average passenger revenue rose in January on reduced capacity. Lower fuel prices are advantageous longer-term, and some experts predict many airlines will make money in 2009.

Southwest recorded a net profit for 2008 and earnings are expected to increase 55 percent in 2009, compared with the 11 percent gain projected for the regional airline industry, according to Thomson.

What are prospects for shares of AIM Charter Fund?

Starting last year with 17 percent of its portfolio in cash helped it outperform most other large growth-and-value funds in a brutal year for stocks.

The $3.8 billion AIM Charter Fund is down 25 percent over the past 12 months and has a three-year annualized decline of 5 percent. Those results rank in the top 4 percent of its category.

"I recommend AIM Charter as a fund that can be a larger slice of your portfolio that you could be comfortable owning multiple years," said Ryan Leggio, analyst with Morningstar Inc. in Chicago. "Manager Ron Sloan is a good stock picker who has been investing a very long time and really thrives in down markets, though he doesn’t do as well in high-flying markets."

It remains to be seen whether contrarian portfolio holdings American Express Co. and Legg Mason Inc. will disappoint investors, Leggio said.

AIM Charter owns primarily large-cap stocks but also some mid-cap holdings. Nearly one-fifth of assets are in financial services, with health care and technology hardware other concentrations. The fund limits its largest holdings to 2.5 percent to 3 percent of assets to keep diversified. Largest holdings include Symantec Corp., Progressive Corp., Medtronic Inc., Berkshire Hathaway Inc., Microsoft Corp., 3M Co., Cadbury PLC, Comcast Corp., Wells Fargo & Co. and Automatic Data Processing Inc.

The 5.5 percent load fund requires a $1,000 minimum initial investment and has an annual expense ratio of 1.19 percent.

andrewinv@aol.com

2009, TRIBUNE MEDIA SERVICES INC.

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Filed under: finance by Fred