Did Berkshire Hathaway Dump Wells Fargo?

SMITH BRAIN TRUST – Maryland Smith’s David Kass, a finance professor and longtime follower of investment oracle Warren Buffett, tells Business Insider he thinks Berkshire Hathaway may have sold its entire $9.3 billion stake in banking behemoth Wells Fargo.

Kass points to evidence that Berkshire just dumped its fifth-biggest stock holding, citing evidence from the investor’s second-quarter earnings report, published Aug. 8.

Buffett would have his reasons for parting ways or creating some distance, says Kass, He points to problems that have been simmering at Wells Fargo since a fake accounts scandal broke in 2016 and sullied the bank’s reputation, causing regulators to impose balance-sheet restrictions that hamper the bank’s growth.

Or Buffett might just be smitten with a new interest, Kass tells BI: Berkshire recently picked up $2 billion on Bank of America stock, now its second-largest holding behind Apple.

Kass outlines his evidence for Business Insider:

1. In the second quarter of 2020, Berkshire’s net stock sales were $12.8 billion, more than half of which were unexplained, says Kass. He speculates that it could be from the sale of the 323 million Wells Fargo shares Berkshire held in its portfolio in March.

2. Kass says he finds it suspicious that Berkshire only named its top four holdings this time around, with no mention of Wells Fargo, previously listed among its top five holdings.

3. Berkshire has been paring back its Wells Fargo stake in recent years, says Kass.

4. Kass’ last clue Wells might be out: Berkshire reports a $9.3 billion decline in the value of its banks, insurance and finance stocks on a cost basis last quarter, indicating the sales were in that part of its portfolio, he says.

Kass did share an alternate theory with Business Insider: Perhaps Berkshire actually dumped its JPMorgan shares instead.

“The bottom line appears to be that Buffett views Bank of America and JPMorgan as being better-managed banks with many fewer problems than Wells Fargo," Kass says.

Read more at Business Insider.