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Warren Buffett’s Berkshire Hathaway Sold Its Wells Fargo Shares — Should You Do the Same?

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When Warren Buffett pulls out of a stock, Wall Street takes notice. Wells Fargo learned that lesson early this week after Buffett’s Berkshire Hathaway disclosed that it sold its remaining shares in the bank during the first quarter, ending a decades-long investment and sending Wells Fargo’s stock price close to a 2022 low.

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Buffett had been a top investor in Wells Fargo in recent years even though the bank has been engulfed in a series of scandals and problems, CNN Business reported. In 2020 it got hit with a $3 billion fine due to millions of fake accounts having been created at the bank. Two years earlier, Wells Fargo had to set aside $285 million to refund foreign-exchange and wealth-management clients it had overcharged.

Partly because of those scandals, the Oracle of Omaha began trimming his stake in Wells Fargo three years ago. He still had a small position in the bank during the 2021 fourth quarter before bailing this year amid pressure from shareholders.

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Shares of Wells Fargo fell more than 2% in early trading on May 18. The stock is down nearly 20% for the year amid a broader stock market slump.  

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Berkshire exited Wells Fargo as the bank continues to deal with regulatory issues and attempts to improve efficiencies, which include job cuts and the possible sale of some of its businesses, Bloomberg reported.

Despite those problems, the 31 analysts who follow Wells Fargo still have an average rating of 2 on the stock, according to Yahoo Finance. That puts it firmly in “buy” territory. Nearly half of the analysts (15 of 31) queried have a “hold” rating on the stock, with eight rating it a “buy.”

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For investors with large positions in banking/finance, the good news is that Buffett remains bullish on the sector despite selling all of his Wells Fargo shares. Berkshire is still invested in plenty of other banking and financial giants. Two of its top four stock holdings are Bank of America and American Express, CNN noted. The company also significant positions in Citigroup, Ally Financial and Geico.

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