Warren E. Buffett's Berkshire Hathaway Inc. has increased its stake in
Wells Fargo & Co. Ticker:(WFC), building equity holdings amid a market decline that the billionaire investor said provided an opportunity for buying stocks “on sale.”
Berkshire Hathaway added 9.7 million shares of the biggest U.S. home lender in the three months ended June 30, boosting its stake by 2.8%, the company said last week in a filing that listed its U.S. stock holdings. Berkshire Hathaway accelerated purchases Aug. 8 as the S&P 500 plunged 6.7%, its steepest decline since December 2008.
“I like buying on sale,” Mr. Buffett, Berkshire's chief executive and head of investments, said in a interview with Charlie Rose to be broadcast on PBS.
Mr. 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,” he said last month.
Wells Fargo, which counts Berkshire Hathaway as its biggest shareholder, fell 12% in the second quarter and has slipped about 11% in this quarter.
The increase in the
Wells Fargo stake cost Berkshire Hathaway about $277 million, assuming purchases came at the bank's average second-quarter trading price of $28.53 a share.
'STAY TUNED'
“It looks to me that [Mr. Buffett] couldn't resist topping up,” said Thomas Russo, a partner at Berkshire Hathaway investor Gardner Russo & Gardner.
“Stay tuned. If [Mr. Buffett] 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,” Mr. Russo said.
Berkshire Hathaway's stake is valued at about $8.8 billion.
Wells Fargo, led by chief executive John Stumpf, has slid about 19% since Dec. 31, better than the 25% decline in the KBW Bank Index. Berkshire Class A shares have fallen about 9.8% this year.
Berkshire Hathaway added a stake in retailer Dollar General Corp. Ticker:(DG) in the second quarter and increased holdings in MasterCard Inc. (MA) by 88%. Berkshire Hathaway cut its stake in Kraft Foods Inc. Ticker:(KFT) by about 5.5% to 99.5 million shares.
Mr. Buffett is reshaping its equity portfolio with Todd Combs, who was hired as an investment manager last year. Mr. Combs was assigned to oversee as much as $3 billion with a focus on equities and can make trades without consulting Mr. Buffett.
It was Mr. 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.
DOLLAR GENERAL
The Dollar General stake, valued at about $48 million, also may have been bought by Mr. Combs, Mr. Russo said, citing the size relative to larger bets by Mr. Buffett.
The addition of Dollar General expands Berkshire Hathaway's holdings of discount retailers. Berkshire Hathaway also owns stock in Costco Wholesale Corp. Ticker:(COST) and Wal-Mart Stores Inc. Ticker:(WMT).
Berkshire Hathaway's investment in Dollar General “is almost like a bet on a declining economy,” said Mark Montagna, a senior analyst following retailers at Avondale Partners LLC.
Berkshire Hathaway's biggest holdings, including Coca-Cola Co. Ticker:(KO) and Wells Fargo, have slipped in the past few weeks as global equity markets retreated. Mr. Buffett has reiterated his view that the United States will avoid another
recession.
“Financial markets create their own dynamics, but I don't think we're facing a double dip,” he told Bloomberg Television in an interview Aug. 6.
CONFIDENTIAL TRADES
Berkshire Hathaway omitted some information about its portfolio for the second straight quarter. The 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.
Berkshire Hathaway's equity portfolio was valued at $67.6 billion as of June 30, with 40% in consumer products firms and 37% in financial companies such as banks and insurers. The rest was in a group that Berkshire Hathaway labels “commercial, industrial and other.”
Mr. Buffett agreed in March to spend $9 billion on engine additives maker Lubrizol Corp. (LZ), and this month offered to buy reinsurer Transatlantic Holdings Inc. Ticker:(TRH) for about $3.25 billion.
Berkshire Hathaway held $47.9 billion of cash as of June 30.
Last week's filing by Berkshire Hathaway includes U.S. holdings. Equity investments abroad are reported to local regulators.
