Berkshire Hathaway Sells 7 Million Shares of Wells Fargo & Co (WFC)

Wells Fargo & Co (NYSE:WFC) is trending on Wednesday after Berkshire Hathaway disclosed that it has sold 7.134 million shares of the bank between April 10 and April 12. In addition to the 7 million shares, Berkshire intends to divest another 1.865 million shares in the near future. Fortunately for Wells Fargo & Co (NYSE:WFC) bulls, Berkshire isn’t selling because it is bearish on the bank. Instead, Buffett’s firm, which owned 479 million shares at the end of December, is selling because it is forced to under federal regulations that require holdings of any individual shareholder of major banks to be under 10%. Due to the fact that Wells Fargo has been buying back it stock, Berkshire’s holdings have temporarily increased beyond the 10% level and Buffett’s firm is selling to fall under that threshold.

Berkshire elaborated in a press release: ‘A little over a year ago, repurchases by Wells Fargo of its common stock caused Berkshire’s ownership interest in Wells Fargo to exceed 10%. As a result, Berkshire filed a Notice of Change in Control with the Board of Governors of the Federal Reserve System. While we then had no intention to purchase more shares of Wells Fargo we recognized that our percentage interest would slowly creep up if Wells Fargo continued to purchase shares. After several months of discussions with representatives of the Federal Reserve, we have concluded that the commitments that would be required of us by the Federal Reserve to retain ownership of 10% or more of Wells Fargo’s outstanding common stock would materially restrict our commercial activity with Wells Fargo. Therefore, it would be simpler to keep our ownership below 10%… Berkshire has no present intention to sell Wells Fargo shares in amounts beyond the quantity required to provide a small safety margin below 10%’.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

In terms of aggregate hedge fund sentiment, the smart money remained bullish in Wells Fargo in the fourth quarter. Of the 742 elite funds we track, 100 funds owned $34.68 billion of Wells Fargo & Co (NYSE:WFC) and accounted for 12.50% of the float on December 31, versus 104 funds and $27.42 billion respectively on September 30.

The Bottom Line

Wells Fargo & Co (NYSE:WFC) is trending due to Berkshire Hathaway disclosing that it has sold several million shares of the bank. Fortunately, Berkshire Hathaway selling does not indicate that Warren Buffett is less bullish. Rather instead, Berkshire is selling because it is forced to under federal regulations. For more reading, check out ‘Warren Buffett’s Rousing Quotes On Investing‘.


Berkshire Hathaway Chairman Warren Buffett Interview