Buffett Adding Wells Fargo Sets Bank Apart at Berkshire

Billionaire Warren Buffett’s accumulation of Wells Fargo & Co. (WFC) stock is making the lender stand out among Berkshire Hathaway Inc. (BRK/A)’s largest holdings.

Buffett added shares of the bank for the ninth straight quarter, bringing Berkshire’s total investment to almost $20 billion, according to a regulatory filing today. The stake is the largest holding in a portfolio that includes about $15.6 billion of Coca-Cola Co., $11.4 billion of American Express Co. (AXP) and $12.7 billion in International Business Machines Corp. (IBM)

Buffett, Berkshire’s 82-year-old chairman and chief executive officer, favors making concentrated bets on companies he’s studied for years and calls his top investments the “big four.” He said last year in an interview that Wells Fargo, the largest U.S. home lender, navigated the financial crisis better than competitors and should benefit as housing rebounds.

“He puts his money where his mind is,” said Jeff Matthews, a Berkshire shareholder who has written books about Buffett and his company. “His mind is clearly on the idea that housing in America is going to be a powerful economic growth engine for years to come. And, if you think that way, Wells Fargo is a prime candidate to benefit.”

Photographer: Daniel Acker/Bloomberg

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, Inc., in Omaha, Nebraska. Close

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, Inc., in Omaha, Nebraska.

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Photographer: Daniel Acker/Bloomberg

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, Inc., in Omaha, Nebraska.

The Wells Fargo holding has surged by about 60 percent to 463.1 million shares in the five years through June 30, according to regulatory filings from Omaha, Nebraska-based Berkshire. Buffett hasn’t added to AmEx and Coca-Cola (KO) since the 1990s. He built the IBM stake beginning in 2011.

Stock performance has also caused the value of the top holdings to diverge. Wells Fargo is up 26 percent this year, outperforming the 7.8 percent advance at Coke and the slide of about 3 percent at IBM. AmEx has gained 30 percent.

Housing ‘Megatrend’

“I don’t see any other megatrends that would affect the other of the big four in quite the same way” as housing does for Wells Fargo, Matthews said. “Coke is struggling. People are drinking less cola. That’s a problem. IBM is struggling. People are going to Amazon to get their businesses online instead of building big glass rooms full of IBM equipment.”

For American Express, Buffett may be limited because he has accumulated 14 percent of the New York-based company’s shares, Matthews said. That compares with a stake of about 8.7 percent of Wells Fargo, according to data compiled by Bloomberg.

Berkshire Vice Chairman Charles Munger said in 2011 that Atlanta-based Coke wasn’t as good of a business as it was two decades earlier when he and Buffett were building the stake. Still, he said the soft-drink maker was “one of his favorites” among the big companies that sell similar consumer goods.

‘Finance Engine’

Wells Fargo, led by CEO John Stumpf, posted record net income of $18.9 billion in 2012. The San Francisco-based bank originated about 23 percent of U.S. home loans in the second quarter, according to Inside Mortgage Finance, an industry publication.

The investment adds to Berkshire’s bets on the housing market. Among Berkshire’s more than 80 operating units are businesses that make paint and bricks, build manufactured houses and broker home sales.

Wells Fargo is the “finance engine” among Berkshire’s housing bets, said Douglas Ciocca, CEO of Leawood, Kansas-based Kavar Capital Partners LLC, which manages about $280 million. “Stumpf has certainly been the steady ship director through this entire process because they focused on home lending, less on exotic derivatives.”

Buffett has been ceding more responsibility over a $103.3 billion stock portfolio to Ted Weschler, 52, and Todd Combs, 42. The money managers will be responsible for investments once the billionaire is no longer leading the company. Berkshire doesn’t say who makes each pick listed in filings, though Buffett has said he oversees the larger holdings.

Suncor, GM

Berkshire today reported a stake in Suncor Energy Inc. (SU) valued at more than $500 million. The Calgary-based oil producer benefited from a narrowing gap between oil-sands crude grade Western Canada Select and U.S. benchmark West Texas Intermediate. Producers are working around a shortage of pipelines that was depressing Canadian heavy-crude prices by moving more volumes to market by rail.

Buffett’s company boosted a holding in General Motors Co. (GM) by 60 percent to 40 million shares, in the second quarter. The stake is valued at about $1.4 billion. Buffett said last year that the bet on the automaker wasn’t his.

Today’s filing omitted some information about the portfolio. The U.S. Securities and Exchange Commission sometimes allows companies to withhold data from the public to limit copycat investing while a firm is building or cutting a position. Buffett’s firm requested confidential treatment in 2011 filings, as the billionaire spent more than $10 billion amassing the stake in Armonk, New York-based IBM.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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