Warren Buffett’s Berkshire Hathaway was a major, long-term investor in Wells Fargo for over 30 years, first buying in 1990. But he began selling off its significant stake starting in 2019 and completely exited the position in the first quarter of 2022.
That signaled an end to the “love affair” due to numerous scandals, including the fake accounts scandal, leading to regulatory fines and an asset cap that hampered growth.
Mr. Buffett famously used the “cockroach” analogy for the persistent issues, eventually deciding to shift capital from the struggling bank to other opportunities, like Citigroup and Occidental Petroleum, during a volatile market period.
Key Aspects of the Relationship:
Berkshire Hathaway was a top investor in Wells Fargo for decades, holding it as a significant portfolio staple.
A series of misdeeds, including fake account openings in 2016, overcharging customers, and issues with auto insurance, led to heavy fines and a Federal Reserve asset cap, damaging the bank’s reputation and operations.
Berkshire began reducing its stake in 2019 and fully sold its remaining shares in Q1 2022, ending the investment.
He expressed frustration with the bank’s leadership and persistent problems, famously saying, “There’s never just one cockroach in the kitchen” and noting that shareholders were paying for management’s failures.
The sale freed up cash to invest in other areas, with Berkshire buying shares in rival Citigroup and increasing stakes in Occidental Petroleum and Chevron in 2022.
In essence, the once-strong partnership between Buffett’s firm and Wells Fargo unraveled as the bank failed to resolve its deep-seated operational and ethical issues, prompting Buffett to cut his losses.
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“The supreme quality for leadership is unquestionably integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office.”
-Dwight D. Eisenhower
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