Warren Buffett's Berkshire Hathaway Unloads Bank Stocks
August 14 2020 - 5:37PM
Dow Jones News
By Ben Eisen
Warren Buffett's Berkshire Hathaway Inc. unloaded billions of
dollars of bank stocks as the U.S. economy reeled during the
coronavirus lockdown.
Berkshire's holdings of Wells Fargo & Co. and JPMorgan Chase
& Co. stock dropped by more than $3 billion apiece in the
second quarter, according to regulatory filings made public Friday.
The company also dissolved its stake in Goldman Sachs Group Inc.,
which was worth $300 million at the end of the first quarter.
The conglomerate has simultaneously been adding to its ownership
of Bank of America Corp. in recent weeks and now owns roughly 12%
of the company, according to FactSet.
Bank stocks have taken a big hit this year as the largest set
aside tens of billions of dollars to account for potential loan
losses. Bank executives have said they believe the current
recession will now be deeper and longer than initially expected.
The KBW Nasdaq Bank Index has fallen 31% this year.
Mr. Buffett has expressed optimism about a recovery in the U.S.
economy, but warned in May that stocks can be unpredictable.
"You can bet on America, but you are going to have to be careful
on how you bet. Simply because markets can do anything," he
said.
Berkshire's sales amount to a 26% drop in its shareholdings of
Wells Fargo. His JPMorgan stake is down by 62%. He also sold shares
of Bank of New York Mellon Corp., M&T Bank Corp., and PNC
Financial Services Group Inc., among others.
The sale of Wells Fargo shares is particularly notable because
it likely means Berkshire is no longer the biggest shareholder. Mr.
Buffett first bought shares in 1989 and stood by Wells Fargo as its
sales-practice scandal unfolded, sometimes receiving criticism for
it.
"All the big banks have had troubles of one sort or another,"
Mr. Buffett said at Berkshire's annual meeting in 2018. "And I see
no reason why Wells Fargo as a company, from both an investor
standpoint and a moral standpoint going forward, is in any way
inferior to the other big banks with which it competes."
At the end of last year, Berkshire's 8.4% ownership stake was
worth $18.6 billion, for which the company paid $7 billion, the
company said in its annual letter. But the stock has fallen by more
than half since then, hit by the economic collapse stemming from
the pandemic, the bank's first quarterly loss since the financial
crisis and its decision to slash its dividend.
That has reduced Berkshire's paper profits -- and the tax bill
that would come from any sale.
Mr. Buffett, however, is betting big on Bank of America.
Berkshire didn't buy shares in the second quarter, but in recent
weeks disclosed additional purchases, lifting its holdings of the
bank above the 10% threshold Mr. Buffett has said he typically tops
out at.
Bank of America shares have risen 9.7% over the last month, but
remain down by almost a quarter in 2020.
Berkshire first invested in Bank of America in 2011, buying $5
billion in preferred shares when the lender was struggling after
the financial crisis. Berkshire also received warrants to buy
common shares, which it exercised in 2017 to become the bank's
largest shareholder.
Mr. Moynihan said in a recent television interview that Mr.
Buffett first reached out to invest in the bank by dialing its call
center and asking to speak with the CEO. The two talk periodically,
Mr. Moynihan said in a recent interview with Time.
--Nicole Friedman contributed to this article.
Write to Ben Eisen at ben.eisen@wsj.com
(END) Dow Jones Newswires
August 14, 2020 17:22 ET (21:22 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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