Wells Fargo shares were the best performers in Buffett’s portfolio

Wells Fargo shares were the best performers

Something was missing from Warren Buffett’s portfolio:

  • Buffett’s decision to divest almost all of Wells Fargo’s stock deprived him of roughly $12 billion in profits.
  • In 2021, the growth in the value of the shares of that bank was 61% while its income increased 10 times. But the scandals that caused his fall in 2020 were reason enough for the divorce from Berkshire.
  • Instead of receiving an approximate profit of $12.2 billion, Buffett made $4.4 million.

The performance of Warren Buffett’s Berkshire Hathaway portfolio last year highlights significant capital gains for the legendary investor. Although Apple was the one that reported the highest profits, it was not the best performer, since that place was occupied by the Wells Fargo bank.

Meanwhile, it is worth mentioning that Apple shares grew 35% in the “Oracle of Omaha” portfolio. At the same time, those of the aforementioned bank rose by 61% by the end of 2021. This example performed, overshadowed that of the rest of Berkshire’s star actions.

However, this rise did not translate into significant gains, as Buffett exited almost all of Wells Fargo’s shares. This gigantic cut in his participation in the bank occurred as a result of some scandals that involved that financial institution.

Warren Buffett’s portfolio barely noticed Wells Fargo’s towering rise

The fact that Buffett’s portfolio saw a significant performance in one of its stocks is not reflected in dollar earnings. Consequently, the investor made a drastic cut to his funds in the bank.

Thus, from owning about 323 million shares by the end of 2019, by 2021 he had barely 675,000 Wells Fargo shares. Had he kept his positions in the bank, his earnings would now be about $2.1 billion. But they are $4.4 million.

On the other hand, if he had reinstated his money when the bank’s shares fell in 2020, his earnings would have been about $12.2 billion. Despite this, it is highlighted that the investment vision that the Oracle has is based on the ethics of companies. In this sense, the scandals of the aforementioned bank, as well as the foreseeable effects of the pandemic, pushed the investor to make the great cut in share ownership.

Similarly, Warren Buffett’s portfolio shed much of the bank-related stocks. The big exception was Bank of America, which is currently one of the most successful holdings after Apple, according to Bloomberg.

While the gains on Warren Buffett's portfolio were surreal, they would have been greater had he stayed in the game with Wells Fargo.  Source: Bloomberg
While the gains on Warren Buffett’s portfolio were surreal, they would have been greater had he stayed in the game with Wells Fargo.

Wells Fargo’s turnaround in 2021

Removing from the scene the events that pushed the investor to dispose of his holdings in Wells Fargo, it can be said that it was a missed opportunity. If it was on the canvas, the shares of that institution shot up significantly in 2021. One of the reasons would be the efforts of its CEO, Charlie Scharf, to change the direction of the bank’s behavior.

Among this, the overcoming of some regulatory obstacles stands out, which restored confidence to investors. Thus, income grew more than 10 times after the deep fall in 2020. At the same time, although the bank has some setbacks to clear up, its situation is much more solid. In fact, after being last in the KBW Banking Index, they are now in third position.

It’s a rally that would have propelled Buffett’s portfolio even higher than it was at the beginning of the year. It must be taken into account that his growth was of such magnitude that in the top ten of the richest in the world, he was the only one with green numbers at the start of the year.

Although this is a somewhat missed opportunity, $12 billion less or $12 billion more, they don’t seem to play a big part in Berkshire Hathaway’s capital power.