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Two Ways To Play: Wells Fargo Hitches Wachovia To Its Wagon


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Shares of Wells Fargo (WFC) rose early in the session after the company sealed the deal to acquire Wachovia (WB) for $11.7 billion. Both companies said they will stick to the terms of the deal struck on October 3rd. This leaves out Citigroup (C), which made its own offer 4 days earlier.

The deal is Wells Fargo Chairman Richard Kovacevich's biggest since he led Norwest Corporation's takeover of Wells Fargo roughly 10 years go. Like JPMorgan's (JPM) purchase of Washington Mutual, he's using the worst financial crisis since the Great Depression to extend firm's reach.

Deutsche Bank analyst Mike Mayo said it's the best deal of the bunch. In a note to clients, he wrote, "The main issue -- and it's a big issue -- is how much weaker US housing, mortgage and consumer markets will take a toll."

WFC closed the day up 5% to $28.66 after a very volatile trading session.

From the Bull Pen: Stocks like Wells Fargo, Bank of America and JPMorgan will survive this mess and benefit in the long run. Bulls can look to these plays when the tape finally turns.

From the Bear Cave: At risk may be the smaller regional banks, but with the tape so oversold, bears may be wise to sit this one out.

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No positions in stocks mentioned.

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