Have you taken a look at the five-year chart of Wells Fargo & Co (NYSE:WFC) recently? I did before deciding what I wanted to write about for this article. I quickly realized that Wells Fargo stock has gone sideways since June 2014; its four-year anniversary just weeks away.
Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) CEO Warren Buffett’s been pretty stoic about the trials and tribulations at Wells Fargo, suggesting current CEO Tim Sloan is working through the problems and will eventually get it all sorted out.
Well, Sloan better for both Buffett’s sake and the millions of others holding WFC stock.
Consider Buffett’s Position
As we know from Berkshire Hathaway’s annual letter to shareholders, not only is Wells Fargo stock the company’s largest common stock investment at $29.3 billion; it also has the biggest gain in terms of dollars of the company’s 15 largest positions.
As they say, “You dance with the one that brought you.”
However, consider what this loyalty has meant to shareholder returns.
On the surface, not very much, given how well Berkshire Hathaway stock has done in recent years. But take a closer look, and you realize that if not for the dividends, Buffett’s Wells Fargo position would be seriously underperforming.
Including dividends, Wells Fargo stock has a 46-month annualized total return of 2.8% between Jun. 2, 2014 and Mar. 23, 2018. Over the same period, the Vanguard 500 Index Fund (NYSEARCA:VOO), the ETF version of the fund Buffett recommends most investors should own as opposed to investing in individual stocks, is up 10.3% over the same period.
Perhaps the Oracle should have taken his own advice when it comes to Wells Fargo.
Another Way to Look at Wells Fargo
At the end of 2013, Berkshire Hathaway held 483.5 million shares of Wells Fargo stock; at the end of 2017, it held approximately one million fewer shares.
In that time, Wells Fargo’s average annual dividend is $1.47, suggesting Berkshire Hathaway’s earned $2.7 billion in dividends over almost four years holding its stock.
That’s not an insignificant sum until you compare it to the company’s Apple Inc. (NASDAQ:AAPL) holdings which have already resulted in $7.3 billion in paper gains since first buying 9.8 million shares in Q2 2016.
In half the time, Buffett’s made more than twice the money from Apple as he’s made from Wells Fargo.
Bottom Line on Wells Fargo Stock
As I said in a recent article about Wells Fargo, I have a hard time understanding Warren Buffett’s devotion to a bank that’s shown it doesn’t have a problem playing dirty pool to win customers.
“It isn’t sad when a bank of any size gets caught with its hand in the cookie jar; that’s what bank regulators are paid to do. What’s sad is that investors are willing to give Wells Fargo a first, second and third chance to redeem itself,” I wrote Mar. 9. “Aren’t there any other banks in the U.S. worthy of investors’ capital? Of course, there are. I can think of several.”
Even though I believe Wells Fargo’s done little to earn Buffett’s loyalty, he won’t jettison its stock at any point in the future, unlike IBM (NYSE:IBM), which he didn’t have a problem kicking to the curb.
That’s too bad because a high-profile divorce is just what Wells Fargo deserves.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.