Why Warren Buffett Keeps Adding To His Wells Fargo Investment
July 3, 2012 , 2 commentsby: David Kass
In its annual report for 2011, Berkshire Hathaway (BRK.B) reported common stock investments in 11 companies that each had a market value exceeding $1 billion. However, there is only one company to which Warren Buffett has been adding to his position every year since 2005. That company is Wells Fargo (WFC). Berkshire added further to its stake in Wells Fargo during the first quarter of 2012. Currently, Wells Fargo is Berkshire's second largest investment, valued at $13.7 billion. (Berkshire's largest common stock investment is in Coca-Cola (KO), with a market value of $15.6 billion. Berkshire's third largest investment is in IBM (IBM), which has a market value of $12.6 billion.)
In 1990, Berkshire Hathaway made an initial investment in Wells Fargo of $289 million (5 million shares). That position was relatively stable from 1990 through 2004. (In 1998, Wells Fargo merged with Norwest and each share of Wells Fargo was converted into 10 shares of the "new" Wells Fargo.) Dated from 2005, we track Warren Buffett's stake in Wells Fargo in the table below:
Berkshire's Hathaway's Annual Purchases of Wells Fargo
(Source: Data derived from Berkshire Hathaway Annual Reports 2004-2011, SEC 13F First Quarter 2012, and Yahoo Finance.) (Note: It is assumed that Berkshire Hathaway purchased its Wells Fargo shares at the average price in each time period. Neither the annual reports, nor the 13F filings, reveal the actual cost of these purchases each year, or each quarter.)
From this table, it can be seen that Berkshire's largest investments in Wells Fargo were in 2007 ($2,866 million), 2005 ($1,183 million), and 2011 ($1,168 million), respectively. Even at the peak of the financial crisis in 2008, Warren Buffett added $32 million to his position in Wells Fargo. As of March 31, 2012, Berkshire Hathaway owned 7.7% of Wells Fargo and is the bank's largest shareholder.
In recent Berkshire annual meetings, Warren Buffett has praised Wells Fargo as one of his favorite investments. It is ranked number one in the U.S. banking industry in total market value ($176 billion), even though it is only fourth largest by assets. It has the most extensive bank branch network in the U.S., with 6,200 retail branches in 39 states, and serves one of every three U.S. households.
Wells Fargo originates one of every four home mortgages and services more home loans than anyone else. What seems most notable of all is that this is one of a relatively few large banks that has focused almost exclusively on its original mission of commercial banking. It has not diversified into the high risk area of investment banking as so many of its major competitors have. In addition, it has avoided geographically expanding into Europe, where the banks and economies of many countries are facing enormous challenges. Indeed, 97% of Wells Fargo's assets and 98% of its employees are based in the U.S. Wells Fargo vigorously pursues a cross-selling strategy, in which additional products are sold to its existing customers. The average Wells Fargo customer now uses six products from the bank, a substantial increase from the one or two in the 1980's.
Wells Fargo's 2011 net income was almost $16 billion, up from $2.7 billion in 2008. In 2008, it purchased Wachovia for $15 billion, which greatly expanded its presence in the East and the South. This acquisition also resulted in a major entry into brokerage services through Wachovia's A.G. Edwards, which enhanced its ability to cross-sell additional products.
Finally, the current quality of Wells Fargo's loan portfolio compares favorably to its competition. In the first quarter of 2012, Wells Fargo's net charge-offs were 1.25% of its total loans, versus 1.8% at Bank of America (BAC), 2.19% at JPMorgan Chase (JPM), and 3.19% at Citigroup (C).
With analysts currently projecting Wells Fargo to achieve annual growth in earnings per share exceeding 10% over the next five years, and with the shares reasonably valued at 10 times earnings, Wells Fargo is a very attractive investment with an appealing risk/reward profile.
Disclosure: I am long BRK.B, WFC.
From: polyperry
發表於 2012-7-5 09:12
Definition of 'Net Charge-Off Rate'
The dollar amount representing the difference between gross charge-offs and any subsequent recoveries of delinquent debt. The net charge-off is often a percentage representing that amount of debt that a company believes it will never collect compared to average receivables. Debt that is unlikely to be recovered is often written off and classified as gross charge-offs. If, at a later debt, some money is recovered on the debt, the amount is subtracted from the gross charge-offs to compute the net charge-off value.
Read more: http://www.investopedia.com/terms/n/net-charge-off-rate.asp#ixzz1zhqpmzpD
From: mikeon
發表於 2012-7-5 09:54
看過波克夏年報會發現
巴菲特在看一家公司
不會汲汲於追蹤每個月的營收
而是看它背後的原因，
例如造成Mrs. B賣場坪效高的理由是因售價低，
可口可樂賣得好是因帶給人們快樂感等等
亦即好學生特質的檢定
就像我在看巴菲特班會不會成功
不會特別在意每個月的招生人數
因為它受股市影響，有景氣循環
我重視的是同學的介紹率
若新生很多是由舊生介紹來的
表示我的教學是成功
我在意的是舊生的回鍋率
同學願意回鍋顯示認同我的內容
我也會問問同學，
用我們的方法是否有賺到錢
若介紹率、回鍋率、賺錢率都高
那何患新生不會源源而來呢 !!
我發現我看公司的角度
當研究員跟自己開公司有很大的不同
From this table, it can be seen that Berkshire's largest investments in Wells Fargo were in 2007 ($2,866 million), 2005 ($1,183 million), and 2011 ($1,168 million), respectively. Even at the peak of the financial crisis in 2008, Warren Buffett added $32 million to his position in Wells Fargo. As of March 31, 2012, Berkshire Hathaway owned 7.7% of Wells Fargo and is the bank's largest shareholder.
In recent Berkshire annual meetings, Warren Buffett has praised Wells Fargo as one of his favorite investments. It is ranked number one in the U.S. banking industry in total market value ($176 billion), even though it is only fourth largest by assets. It has the most extensive bank branch network in the U.S., with 6,200 retail branches in 39 states, and serves one of every three U.S. households.
Wells Fargo originates one of every four home mortgages and services more home loans than anyone else. What seems most notable of all is that this is one of a relatively few large banks that has focused almost exclusively on its original mission of commercial banking. It has not diversified into the high risk area of investment banking as so many of its major competitors have. In addition, it has avoided geographically expanding into Europe, where the banks and economies of many countries are facing enormous challenges. Indeed, 97% of Wells Fargo's assets and 98% of its employees are based in the U.S. Wells Fargo vigorously pursues a cross-selling strategy, in which additional products are sold to its existing customers. The average Wells Fargo customer now uses six products from the bank, a substantial increase from the one or two in the 1980's.
Wells Fargo's 2011 net income was almost $16 billion, up from $2.7 billion in 2008. In 2008, it purchased Wachovia for $15 billion, which greatly expanded its presence in the East and the South. This acquisition also resulted in a major entry into brokerage services through Wachovia's A.G. Edwards, which enhanced its ability to cross-sell additional products.
Finally, the current quality of Wells Fargo's loan portfolio compares favorably to its competition. In the first quarter of 2012, Wells Fargo's net charge-offs were 1.25% of its total loans, versus 1.8% at Bank of America (BAC), 2.19% at JPMorgan Chase (JPM), and 3.19% at Citigroup (C).
With analysts currently projecting Wells Fargo to achieve annual growth in earnings per share exceeding 10% over the next five years, and with the shares reasonably valued at 10 times earnings, Wells Fargo is a very attractive investment with an appealing risk/reward profile.
Disclosure: I am long BRK.B, WFC.
From: polyperry
發表於 2012-7-5 09:12
Definition of 'Net Charge-Off Rate'
The dollar amount representing the difference between gross charge-offs and any subsequent recoveries of delinquent debt. The net charge-off is often a percentage representing that amount of debt that a company believes it will never collect compared to average receivables. Debt that is unlikely to be recovered is often written off and classified as gross charge-offs. If, at a later debt, some money is recovered on the debt, the amount is subtracted from the gross charge-offs to compute the net charge-off value.
Read more: http://www.investopedia.com/terms/n/net-charge-off-rate.asp#ixzz1zhqpmzpD
From: mikeon
發表於 2012-7-5 09:54
看過波克夏年報會發現
巴菲特在看一家公司
不會汲汲於追蹤每個月的營收
而是看它背後的原因，
例如造成Mrs. B賣場坪效高的理由是因售價低，
可口可樂賣得好是因帶給人們快樂感等等
亦即好學生特質的檢定
就像我在看巴菲特班會不會成功
不會特別在意每個月的招生人數
因為它受股市影響，有景氣循環
我重視的是同學的介紹率
若新生很多是由舊生介紹來的
表示我的教學是成功
我在意的是舊生的回鍋率
同學願意回鍋顯示認同我的內容
我也會問問同學，
用我們的方法是否有賺到錢
若介紹率、回鍋率、賺錢率都高
那何患新生不會源源而來呢 !!
我發現我看公司的角度
當研究員跟自己開公司有很大的不同
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