In the first three months of 2020, Warren Buffett’s holding company, Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B), sold 55.1 million shares of Wells Fargo (NYSE:WFC). That was a 16% reduction in WFC stock.
At the end of 2019, Wells Fargo was one of Berkshire’s five stocks, accounting for 67% of the company’s massive equity portfolio. And now it’s on the way out.
Interestingly, Wells Fargo’s share price is up 22% in the past month, so somebody is buying the bank’s stock.
Who might that be?
The Usual Suspects Buying WFC Stock
In the third quarter, the largest buyer of Wells Fargo in terms of shares bought is Dodge & Cox, the employee-owned mutual fund company. It acquired 27.6 million shares during the quarter and now holds 131 million shares, good for a 3.2% ownership stake.
The second-largest buyer in Q3 2020 was T. Rowe Price (NASDAQ:TROW) at 24.2 million shares. It owns 2.4% of the bank.
Due to Berkshire’s share sales, it is now the fifth-largest owner of WFC stock. The largest shareholder is Vanguard Group, at 7.8%. It added 15.6 million shares during the third quarter, a 5% increase in its holdings. BlackRock (NYSE:BLK) is the second-largest holder at 7.2%.
The biggest seller during the quarter, other than Buffett, was Longview Partners, a London-based investment firm that manages assets for pension funds, foundations, endowments, charities, and high-net-worth individuals. It sold all 25.9 million shares of Wells Fargo that it owned at the start of the quarter.
I’ve never been a fan of Wells Fargo, but clearly, buyers like Dodge & Cox feel the bank is rounding the corner.
InvestorPlace’s Dana Blankenhorn recently discussed why analysts are happy with chief executive officer Charlie Scharf’s job of rightsizing the bank’s costs.
“Scharf’s downsizing has won praise from analysts,” Blankenhorn wrote on Nov. 30.
“Raymond James recently gave it a double-upgrade, to outperform, saying positive catalysts are on the horizon. [InvestorPlace’s Larry] Ramer liked the bank’s third quarter numbers, a profit of 42 cents per share and a $1.1 billion gain in revenue, to $18.8 billion.”
My colleague finished his article by saying Wells Fargo is the best bet among big banks.
I wish I could share his enthusiasm.
Some of the Outliers Buying
To get a better sense of who’s going out on a limb by betting on Wells Fargo, I see a couple of smaller firms that already had significant positions in Wells Fargo before the start of the third quarter and doubled down on the bank.
The first example is Theleme Partners LLP, a London-based hedge fund operating for 11 years. Its 13F filing for the third quarter had $2.2 billion invested in 17 companies; Wells Fargo was one. The firm’s investment in the bank represents 13% of its total assets and its second-largest holding behind only Moderna (NASDAQ:MRNA).
In the third quarter, Theleme added 1.7 million shares. Since the beginning of October, its 12.3 million shares have increased in value by 22.8% to $355 million. They’ve done well for their investors.
A second big play is from Ancient Art L.P., a Texas-based investment advisor with $729 million in assets according to its Q3 2020 13F that are invested in a total of 20 companies. At the end of September, Wells Fargo was its eighth-largest position with 2.6 million shares. It added 1.8 million shares during the third quarter, a 44% increase from the second quarter. WFC stock accounts for 8.3% of its assets, up from 3.5% at the beginning of the quarter.
Kudos to them for adding in a big way at just the right time.
The Bottom Line
I recently wrote about seven stocks to watch in 2021. One of them was Wells Fargo. I did not recommend buying it. Rather, I argued it was a big-time sell.
“If you own Wells Fargo and think it’s going to come out of its tailspin. Think again; if Buffett unloads the rest of his shares in the fourth quarter or early in 2021, lookout below,” I wrote on Dec. 1.
“This is a definite sell.”
And that’s the beauty of the markets. While I believe Wells Fargo is dead money in 2021, investors like Theleme Partners and Ancient Art feel differently and have expressed their difference by stepping up and buying significant amounts of the bank’s stock and profiting their clients in the process.
Sometimes, the market really does work as it was designed.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.