Betting against Buffett: Why Wells Fargo looks weak compared with other big banks

Wells Fargo is Berkshire Hathaway's largest stock holding, as detailed in chief executive Warren Buffett's most recent letter to shareholders. But despite the influential investor's confidence in the stock, some market participants aren't convinced the name is one to own.

Shares of the bank were lower on Tuesday after jumping more than 1 percent the session prior following bullish commentary from Buffett to CNBC on Monday morning.

Though Ari Wald, head of technical analysis at Oppenheimer, is bullish on bank stocks as a group, he wouldn't recommend stepping in to buy Wells Fargo shares at these levels. In fact, he said the technical picture shows more room to fall. The stock tumbled earlier this month when the Federal Reserve restricted the bank's future growth. The central bank cited, specifically, "widespread consumer abuses."

"The stock's been oscillating around this $59 level; not much to glean from that. But what is telling to us is it's been underperforming versus its peers," Wald said Monday on CNBC's "Trading Nation."

Relative to the KBW Bank Index, Wells Fargo has shown a steady decline. There are no signs the stock's relative underperformance is abating, Wald said, and he would look elsewhere in the bank stocks for a buying opportunity. The index has advanced nearly 8 percent in 2018, while Wells Fargo stock has fallen 1 percent in the same time.

Others are more bullish on the name. Despite the company's troubled year and a half, which included a fake account scandal, a board member reshuffling and a new CEO named in the wake of its lending practices under fire, the stock looks like a buy, said Washington Crossing Advisors portfolio manager Chad Morganlander.

"It's fundamentally sound," Morganlander said Monday on "Trading Nation."

"As you move away from the rate repression environment that we've been in over the last 10 years, they will be a clear beneficiary of it. Also, the U.S. economy is doing quite well, credit conditions on the consumer side are quite robust, and then you look at the global environment, the global economy is doing well," he said, adding an increasingly friendlier regulatory backdrop would prove bullish for the stock.

Wells Fargo shares traded lower on Wednesday.

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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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