Warren Buffett’s Berkshire Hathaway Inc increased its stake in Wells Fargo & Co, building equity holdings amid a markets decline that the billionaire investor said provided an opportunity for buying stocks “on sale.”
Buffett’s firm added 9.7 million shares of the biggest US home lender in the three months ended June 30, boosting the holding by 2.8 per cent, Omaha, Nebraska-based Berkshire said yesterday, in a filing that listed its US stockholdings. Berkshire accelerated purchases on August 8 as Standard & Poor’s 500 Index plunged 6.7 per cent, its steepest decline since December 2008.
“I like buying on sale,” Buffett, Berkshire’s chief executive officer and head of investments, said in a television interview with Charlie Rose to be broadcast on PBS. “Last Monday, we spent more money in the stock market buying than any day this year.” Buffett, 80, is spending on stocks and takeovers as near-record low interest rates limit returns in fixed income. Banks, facing tighter regulation, can “still be plenty profitable,” Buffett said last month.
San Francisco-based Wells Fargo, which counts Berkshire as its biggest shareholder, fell 12 per cent in the three months ended June 30 and has slipped 11 per cent in the current quarter. The increase in the Wells Fargo stake cost Berkshire about $277 million, assuming purchases came at the bank’s average trading price for the second quarter of $28.53 a share.
STAY TUNED
“It looks to me that he couldn’t resist topping up,” said Thomas Russo, a partner at Berkshire investor Gardner Russo & Gardner. “Stay tuned. If he liked it at the quarter’s end, and he has as much cash as he had, there’s no reason to think he might not have liked it more in the early half of August.”
Wells Fargo rose 89 cents, or 3.7 per cent, to $25.02 yesterday in New York Stock Exchange composite trading, valuing Berkshire’s stake at $8.8 billion. Wells Fargo, led by Chief Executive Officer John Stumpf, has slid 19 percent since December 31, better than the 25 per cent decline in the KBW Bank Index. Berkshire Class A shares have fallen 9.8 per cent this year.
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Berkshire added a stake in retailer Dollar General Corp. in the second quarter and increased holdings in MasterCard Inc by 88 per cent. Buffett’s firm cut its stake in Kraft Foods Inc. by about 5.5 per cent to 99.5 million shares.
Buffett, Berkshire’s chairman and CEO, is reshaping the equity portfolio with Todd Combs, who was hired as an investment manager last year. Combs was assigned to oversee as much as $3 billion with a focus on equities and can make trades without consulting Buffett. It was Combs, 40, who in the first quarter added a stake in MasterCard, a firm that he had bet on while managing hedge fund Castle Point Capital Management LLC.