Jim Cramer trims bank stocks ahead of earnings

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Written on Jul 5, 2024

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Jim Cramer reduced his exposure to Morgan Stanley and Wells Fargo today.
Both banks are expected to report earnings later this month (July).
Cramer trimmed stakes in MS and WFC as a significant profit.

Famed investor Jim Cramer trimmed his stake in the bank stocks on Friday – a week before the earnings season is scheduled to kick off.

His Charitable Trust sold 110 shares of Wells Fargo & Co (NYSE: WFC) this morning and 50 shares of Morgan Stanley (NYSE: MS).

Cramer trimmed both positions at a significant profit.

Why did Jim Cramer trim positions in MS and WFC?

Jim Cramer’s stake in Morgan Stanley and Wells Fargo following today’s unloading stands at 1,100 shares and 2,000 shares, respectively.

The Mad Money host opted to cut his stakes in bank stocks ahead of their earnings because “these stocks do not react well when their stocks are high going into earnings”.

Shares of Morgan Stanley as well as Wells Fargo are up more than 20% versus the start of this year at writing.

What 2024 elections may mean for bank stocks?

Morgan Stanley and Wells Fargo have been gaining since the presidential debate last week that indicated a higher probability of Donald Trump returning to the White House in 2024.

That’s because Trump is expected to favour leniency in regulation and be more accommodative in terms of mergers and acquisitions which typically is a tailwind for investment banking.

All in all, it made sense to lower exposure to MS and WFC following a period of strengths, as per Jim Cramer.

To me, the question is: why not sell some Morgan Stanley and Wells Fargo for more firepower? The positions were built and forged in tougher times. I think they should be trimmed.

His Charitable Trust earned 12% on Morgan Stanley stock and a whopping 77% on Wells Fargo.

Expectations for Morgan Stanley and Wells Fargo

Morgan Stanley is expected to report its earnings for the second quarter on July 16th. Consensus is for it to earn $1.65 a share – up significantly from $1.24 per share a year ago.

Wells Fargo, on the other hand, will report its second-quarter financial results on July 12th. Expectations for its per-share earnings currently sit at $1.27 versus $1.25 in the same quarter last year.

Wall Street analysts currently have a consensus “overweight” rating on Morgan Stanley stock. Their average price target of $100 on MS, however, is roughly the same as where the bank shares are trading at writing.

Analysts rate Wells Fargo stock at “overweight” as well at writing. They see upside in shares of the financial services behemoth to $64 that translates to about a 10% upside from here.