Buffett’s Berkshire Cuts Stake In Wells Fargo As Analyst Flips To Buy

Billionaire Warren Buffett’s Berkshire Hathaway disclosed on Friday that the investment conglomerate has slashed its stake in US lender Wells Fargo & Co to 3.3%.

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According to a SEC filing, Berkshire (BRK.A) now owns about 137.6 million shares in Wells Fargo, worth $3.4 billion, down from the 237.6 million shares it owned as of the end of the second quarter. The US lender’s shares were down almost 1% in Friday’s after-market session.

Wells Fargo (WFC) stock has been hit hard, diving 54% so far this year as the US investment bank grapples with the financial fallout of the coronavirus pandemic and recent customer scandals. In July, the lender had announced that it would cut its dividend to shore up its finances and as the US Federal Reserve announced that it would put a limit on dividends for banks based on earnings.

The move follows last month’s disclosure that Berkshire built up a new position in Toronto-based miner Barrick Gold and continued to divest shares in a number of large US banks during the second quarter. Buffett shed 85.6 million Wells Fargo shares during the quarter. In addition, the investment conglomerate sold 35.5 million shares of JPMorgan shares, reducing over 60% of its position. It also divested its entire holding in Goldman Sachs but continued to invest in Bank of America during the reported period. Berkshire remains stakeholder of other major conglomerates ranging from Coca-Cola to Kraft Heinz (KHC).

Meanwhile, Odeon Capital Group analyst Richard Bove last week raised WFC to Buy from Hold, saying that despite the bank’s troubles it’s still the biggest private housing lender in an environment of a US housing boom. (See Wells Fargo stock analysis on TipRanks).

“It has a new management. It has tens of millions of customers. It has trillions of dollars. It is going to succeed,” Bove writes. “The stock does not recognize this. It should be bought.”

In a historical perspective, Bove pointed out that WFC is trading at 62.6% of book value, and in the last 30 years the “stock only sold below this level in 2009 and 1992.”

The rest of the Street is sidelined on the stock. The Hold analyst consensus breaks down into 10 Hold ratings and 4 Sell ratings versus 5 Buy ratings. The $30.14 average price target implies 22% upside potential from current levels.