For Immediate Release
Chicago, IL - February 28, 2012 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Lowe's ( LOW ), Wells Fargo & Company ( WFC ), TheGoldman Sachs Group Inc. ( GS ), Bank of America Corporation ( BAC ) and Bank of Ireland ( IRE ).
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Here are highlights from Monday's Analyst Blog:
G-20 and What Else to Expect This Week
The weekend meeting of finance officials from the Group of 20 (G-20) countries deferred a decision on further strengthening the IMF's financial contribution to the ongoing European rescue effort. The group wants Europe to take the lead on strengthening the Euro-zone rescue fund before it will do its part.
European leaders will be discussing the creation of a permanent rescue fund this week, but a final decision on that front will take some time to hammer out. The pressing issue in Europe this week will be implementation of the latest Greek bailout, which goes to a vote in front of the German parliament today.
On the home front, we have a busy economic calendar this week, with the second revision to the fourth quarter 2011 GDP reading coming out Wednesday morning. Given the relatively soft Retail Sales reading following the first release, I expect a modest negative revision to the GDP number.
We will also be getting the monthly Manufacturing ISM survey and the Durable Goods report on Wednesday and Tuesday, respectively. The expectation is for the ISM reading to modestly increase in February -- the fourth consecutive monthly gain in this key indicator -- highlighting a healthy manufacturing sector. Monthly readings on Construction Spending and Personal Income & Outlays, both due on Thursday, will give us a better lay of economic land.
The G-20 meeting was expected to consider the IMF's request to enhance its lending capacity to almost $1 Trillion by raising additional funding commitment of about $500 billion from its member countries. This additional IMF firepower was expected to complement the bulked up Euro-zone permanent rescue facility that will have €750 billion in funding at its disposal.
The Euro-zone fund will combine leftover funds from the existing EFSF fund and fresh contributions from member countries. Germany has been reluctant to commit funds to such an effort, but may not be able to drag its feet much longer following the G-20 call.
The expectation is that both the facilities will come into existence over the next few months. This will provide for a roughly $2 Trillion firewall that the Euro-zone countries can fall back on in case of need. This expectation, coupled with the second installment of the European Central Bank's second liquidity operation later this week, have helped calmed market nerves about Europe in recent days.
On the earnings front, we got better-than-expected results from home-improvement retailer Lowe's ( LOW ) this morning.
Wells Fargo Vends Stake in Overland
According to Bloomberg , Wells Fargo & Company ( WFC ), one of the Wall Street giants, decided to sell its majority stake in Overland Advisors LLC, a privately owned hedge fund supporter. Founded in January 2010, Overland operates as a subsidiary of Wells Fargo.
Though the terms of the transaction were not disclosed, the stake will be sold to a new company controlled by Gordy Holterman, Overland's chief executive officer and Derek Dunn, the chief investment officer of Overland, according to the source. Moreover, through this stake sale, Wells Fargo will retain minority interest in $2.2 billion worth of hedge funds.
Wells Fargo has started retreating money from the fund and aims to complete the process in 2014. The bank has more than $1.6 billion invested in Overland, while external investors account for about $520 million.
Over the past two years, with the increase in Overland's external client base, the fund has recorded strong growth performance. Therefore, following the completion of the deal, Overland's clients will be benefited as the fund will be better positioned for continuing success as an alternative asset-management firm.
For this agreement, Overland is seeking approval from a bulk of unaffiliated investors. In addition to this, the company anticipates the transaction to close in April 2012.
Like other big Wall Street banks such as TheGoldman Sachs Group Inc. ( GS ) and Bank of America Corporation ( BAC ), Wells Fargo has been buckled under the weakness in the wider economy and the fundamental pressures on the banking sector. Wells Fargo's stake selling in hedge fund corresponds to the proposed rules as part of the Dodd-Frank Act, which aims to ban proprietary trading and ownership of hedge funds by banks. The new federal rules, once implemented, will limit banks' rights of hedge funds.
However, last week, Wells Fargo Bank, banking unit of Wells Fargo, has entered into a definitive agreement to purchase BNP Paribas' North American reserve-based and associated diversified energy lending business in an all-cash deal. The deal, subject to regulatory approvals and other customary closing conditions, is anticipated to close in the second quarter of 2012. The purchase is expected to strengthen Wells Fargo's energy banking business.
Earlier in February, Wells Fargo announced that it has accomplished the purchase of Burdale Financial Holdings Limited (Burdale) and the portfolio of Burdale Capital Finance Inc. from Bank of Ireland ( IRE ). The acquisition was a part of the company's effort to broaden its international commercial finance capabilities.
Going forward, we believe that strategic acquisitions will help Wells Fargo expand its business and improve its profitability. Its solid business model, strong capital position and expanded business through the Wachovia acquisition and its integration, expected expense management and improved credit quality, will also support its profit figures. Yet, a sluggish economic recovery and its impact on revenue along with new proposed regulations might limit its growth to some extent.
Wells Fargo currently retains a Zacks #3 Rank, which translates into a short-term 'Hold' rating. Considering the fundamentals, we also maintain a long-term "Neutral" recommendation on the stock.
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