Banking, finance, and taxes
Even If Warren Buffett Did Not Sell Wells Fargo, Why He Might Not Have Bought More Either
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There has been a lot to consider about Wells Fargo & Co. (NYSE: WFC) since its account-opening scandal broke. One top consideration is that we now know about Warren Buffett’s stance from Berkshire Hathaway Inc. (NYSE: BRK-A). It turns out that Buffett stuck by his largest public bank stake.
When this scandal was breaking, Buffett was reportedly not happy with how CEO John Stumpf handled the matter. Whether Buffett played a role in this outcome may never be known. Regardless what the company and Buffett (and even Stumpf) may say in public, the reality is that the scandal and how it was handled cost Stumpf his job as chief executive at Wells Fargo.
In an interview on CNN last Friday, Buffett confirmed that he had not sold any Wells Fargo shares. What is not known is whether Berkshire Hathaway added shares. Buffett and his team applied earlier this year for their ownership to rise above the 10% regulatory hurdle. That may not actually require more share buying because of the Wells Fargo buyback plans, and Buffett had asked in that application earlier in 2016 to remain a passive stakeholder.
Berkshire Hathaway owned just over 479.7 million shares of Wells Fargo as of June 30, 2016. That was a 9.51% stake. Sadly, we may not know just how active Berkshire Hathaway got around the share price weakness for another quarter or so. The reason is that the 13F-HR filing due this week comes with a September 30, 2016 cutoff date.
Just because Buffett isn’t selling more shares doesn’t mean that he is necessarily buying shares either. There is also the possibility that Buffett could be selling puts and being forced to buy more shares at lower prices if those shares drift lower — or collect the premium if the shares do not fall below a threshold.
Wells Fargo shares were above $50 at the start of September, but by the first week of October the low closing price was $43.75. Now, in the post-Trump rally, the shares are back up above $53.00.
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