Billionaire investor Warren Buffetts Berkshire Hathaway Inc. added to holdings of lenders Wells Fargo & Co and U.S. Bancorp in the first quarter as the shares traded at their lowest prices in more than a decade.
Buffetts firm, the largest shareholder in San Francisco- based Wells Fargo, increased its stake in the bank by about 4.3 percent in the first quarter to 302.6 million shares, Berkshire said in a regulatory filing yesterday disclosing its U.S. stock portfolio as of March 31. Omaha, Nebraska-based Berkshire increased its holding of U.S. Bancorp by about 2.2 percent.
Banks that attract deposits at low rates were undervalued in the first quarter because investors wrongly believed that the entire industry was hobbled by risky bets and reckless lending, Buffett said at Berkshires annual meeting earlier this month. The KBW Bank Index fell 37 percent in the first quarter.
All banks arent alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not, said Buffett, Berkshires chief executive officer and chairman, at the companys May 2 annual meeting.
Wells Fargo shares closed at $24.87 yesterday on the New York Stock Exchange after falling below $9 in March. Buffett said he was speaking to a class the day the shares dropped that low and told students that, at such a price, If I had to put all of my net worth into stock, that would be the stock.
Where His Mouth Is
Buffett is putting his money where his mouth is, said Gerald Martin, a finance professor at American Universitys Kogod School of Business in Washington who has studied Berkshires investing history. I dont think hes ever been this transparent about what hes doing.
Known as the Oracle of Omaha, Buffett has become a cult figure among investors, drawing a record 35,000 people for the firms shareholders meeting this year. Mutual funds and individuals mimic the stock picks to duplicate Buffetts success, and a study co-authored by Martin in 2007 found that using this strategy for 31 years would have delivered annualized returns of about 25 percent, double the Standard & Poors 500.
Berkshire spent $624 million on stocks in the quarter, and sold shares of companies including oil producer ConocoPhillips for $739 million, Buffett said in a separate filing last week. The decline in ConocoPhillips stock contributed to Berkshires worst quarterly loss in at least two decades as Buffett, 78, worked to recover from what he called his major mistake of buying the shares with oil prices near their peak.
Johnson & Johnson
Buffetts firm also added to holdings of Johnson & Johnson, the worlds largest maker of health-care products, after selling shares in the New Brunswick, New Jersey-based company in the fourth quarter.
Buffett said in February he reluctantly sold J&J shares near the end of 2008 to help fund investments in $8 billion of preferred shares and warrants of General Electric Co. and Goldman Sachs Group Inc. Berkshires holding of J&J expanded 14 percent in the three months ended March 31 to 32.5 million shares.
The increased stake falls short of the 61.8 million shares Berkshire held on Sept. 30. J&J sold for an average of about $60.10 in the last three months of 2008 and $54.65 in the first three months of this year. The stock closed at $55.41 yesterday.
It probably got down to where he couldnt pass it up, Martin said.
Berkshire increased its stake in Union Pacific Corp., the second-largest U.S. railroad, by 7.3 percent to 9.6 million shares. Berkshire is the largest shareholder in that firms larger rival, Burlington Northern Santa Fe Corp.
Berkshire also increased its investment in Nalco Holding Co., the worlds biggest maker of water purification equipment, by 14 percent to 32.5 million.
Berkshire cut its stake in UnitedHealth Group Inc., the top U.S. health insurer by sales, by 29 percent to 4.5 million shares. Buffetts firm also reduced the holding in the fourth quarter.
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