Why Warren Buffett sold some shares of Wells Fargo – The Motley Fool – tech2.org

Why Warren Buffett sold some shares of Wells Fargo – The Motley Fool


Wells Fargo (NYSE: WFC) has lost favor with investors. One of the "four big" US banks in practice, the company has been harshly persecuted by the scandal and affected by a low fundamental performance. See how it's done compared to the other big banks:

  WFC Chart

For many years, one of the most enthusiastic bulls in Wells Fargo has been Berkshire Hathaway (NYSE: BRK-A) [19659006] (NYSE: BRK-B) President and CEO Warren Buffett. But is he becoming a bear? Berkshire has reduced its stake in the bank for two consecutive quarters. Maybe that presages the eventual abandonment of Buffett of his investment once loved.

  The exterior of a Wells Fargo branch.

Image source: Wells Fargo.

Small withdrawals

According to Berkshire's latest regulatory filing 13-F, its stake in Wells Fargo weighs more than 464 million shares, or 9.4% of the company. This mbadive accumulation makes Berkshire the bank's main shareholder.

Regulatory submissions reveal that before the two rounds of sales, Berkshire owned just under 480 million shares. So, in total, the company gave only 3% of its current share.

After making the first and largest sale, and promising a smaller later, the company released a statement in April that said: "These sales are not being made due to investment or valuation considerations. only for the desire to return to a property percentage lower than … 10%. "

Berkshire added that" the commitments that the Federal Reserve would require us to maintain ownership of 10% or more of the common shares outstanding of Wells Fargo would materially restrict our commercial activity with Wells Fargo. "

In other words, Berkshire has no desire to change the nature of the relationship with the company. This clearly is not a difficult task. principle, since Berkshire owns more than 17% in another major financial company, American Express (NYSE: AXP) .

And, like American Express, Buffett continues to personally support Wells Fargo and his company. Last month, he said bluntly to the current CEO that "Tim Sloan has my faith."

When the first Wells Fargo scandal broke out in November 2016, Buffett acknowledged the bad decisions the bank had made. Even so, he maintained his support for it, describing Wells Fargo in an interview as an "incredible institution."

True believers

Of course, anyone who has bought so deeply in a company has a great interest in saying positive things about it publicly. After American Express lost a long-standing deal with Costco Wholesale earlier this decade, Buffett continued to talk about the business of the credit card giant and its management team.

But Berkshire and Buffett tend to be quite direct about their reasons for buying, selling and holding stocks, one of the many refreshing things about them. For example, in the last of Berkshire's famous annual letters to his shareholders, the legendary investor openly admitted making a disastrous $ 434 million investment in a footwear company.

Finally, Berkshire is an extreme example of a buy and hold portfolio investor. . Just look at American Express: the company began to invest in the credit card established in 1964. Through several recessions, blockages in market share and the ugly divorce of Costco, it has remained firm. Similarly, the scandals and underperformance at Wells Fargo are probably not enough to keep him away from his long-term tenure at the bank.

So I bought Berkshire's explanation that he is losing shares of Wells Fargo so as not to complicate his relationship with the Bank. The modest 3% mbadive sale also supports this claim. Although we could see more small-scale divestments of participation, I would bet Berkshire will keep almost everything. The indications we have suggest that Buffett has not lost his faith in the bank, at least not enough for a mbadive sale.

Eric Volkman does not have a position in any of the actions mentioned. The Motley Fool owns shares and recommends Berkshire Hathaway (shares B). The Motley Fool recommends American Express and Costco Wholesale. The Motley Fool has a disclosure policy.

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