No bank stock has epitomized the two month rally in the financial sector like Wells Fargo. Sure, Citi has quadrupled in share price, but now sits at $4.11. AIG has double its value for its shareholders in the last few weeks alone, as has Heartland Financial, and several other banks have posted strong gains as well.

However, Wells Fargo has definitely been one of the brightest stars in the banking industry. At its low point, Wells Fargo (WFC) traded at $7.80 on March 5th. Thursday (May 7), the stock traded above $28 early in the day before dropping to a close at $24.76. This marks about a 300 per cent gain in under two months.

Of course, some of the company’s share price gains can be attributed to increasing hope a credit sector, and a broader economic recovery. The Bush Administration has recently conducted “stress tests” of 19 banks to determine how much more capital infusion might be required to help those banks perform and continue to be able to deliver credit. Initial reports are that the tests were in line with expectation, which has reinforced some of the optimism that the finance sector has bottomed, and is in recovery mode.

Wells has been an especially consistent, stable and strong performer that has shown resilience to much of the turmoil faced by other banks. The company just posted a $3 billion quarterly earnings, which served as one of the catalysts for the latest surge in bank stocks.

While other bank stocks have produced great short term gains for day traders and growth buyers, many still remain well off purchase prices from last year. The aforementioned Citi still looks weak to those traders who bought in at the $30-40 share price range sometime late last year.

Wells Fargo last traded in the $30 price range in late December and early January, before the sharp drop to its low in March. With the growing stability in the credit sector and positive financial reports from the bank, it seems reasonable that Wells Fargo stock could approach its 52-week high of $44.75 at some point in the future.

The company’s share prices are down in pre-market trading early Friday following the announcement of a 341 million share common stock issuance at $22 per share. While this has held Wells Fargo stock in check this morning, the $.76 earnings per share from its last quarter, and the $.20 per share dividend will provide incentive for buyers going forward.

Neil Kokemuller
9:08 AM EST
Friday, May 8, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .
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