Warren E. Buffett, a savvy stock picker known for investing in undervalued companies with strong fundamentals, has amassed a 9.8% stake in Wells Fargo & Co.
The big San Francisco-based banking company, which has seen its stock battered in recent months because of concerns over real estate loans, on Wednesday expressed delight at having Buffett as its biggest shareholder, with 5.03 million shares now worth $250 million.
“This is good news indeed,” Wells Chairman Carl E. Reichardt and President Paul Hazen crowed to employees in a memo. Reichardt, who talks with Buffett from time to time and met with him in San Francisco two weeks ago, called the purchase “an endorsement from one of the most astute investors in the country.”
The holding was revealed Tuesday in a filing with the Securities and Exchange Commission in Washington. It did not disclose when the shares were purchased or at what prices.
Wells Fargo shares have been trading recently in the high $40s. On the New York Stock Exchange on Wednesday, the price rose $1.375 to $50.50. The stock reached a high of about $87 a year ago.
Buffett, chairman of Berkshire Hathaway Inc. in Omaha, has a reputation for taking large positions in undervalued stocks, then holding on to let them appreciate. Buffett, 60, who got interested in investing at age 9, favors well-run companies with familiar brands or franchises. He has said his “favorite holding period is forever.”
The investments are made through Berkshire Hathaway, a former textile manufacturer, and various insurance subsidiaries. Berkshire Hathaway owns See’s, the candy maker, and World Book encyclopedias.
Occasionally, Buffett will take an active role by joining a company’s board. He now serves on the boards of Coca-Cola Co., Salomon Inc., Capital Cities/ABC Inc. and Gillette Co., companies in which he holds sizable stakes. Hazen said in a telephone interview that there has been no discussion about Buffett’s joining the Wells board.
Wells’ announcement of Buffett’s purchase confirmed speculation that had circulated on Wall Street for months.
“This is not new news,” agreed Livia S. Asher, a bank analyst with Merrill Lynch Capital Markets in New York. “But in today’s bank stock market, I guess anything that can be perceived as a positive will be taken to heart.”
Richard X. Bove, an analyst with Dean Witter in New York, agreed that “it is highly probable that this (holding) was built up over a long time.” If so, it is possible that Buffett bought many of his shares in the high $60s, well above current levels. Bove speculated that Wells’ recent report of improved third-quarter earnings might have “emboldened” Buffett to disclose his holding with the hope that other investors would follow his lead and help boost the stock price.
Buffett’s revelation follows filings by Laurence A. Tisch and members of his multibillionaire family, who recently bought stakes in Continental Bank Corp., Baybanks Inc. and Equimark Corp. The three bank holding companies’ stocks had been among those in disfavor in the recent banking-stock blood bath. Like Buffett, Tisch, the chief executive and largest stockholder of CBS Inc. and chairman of Loews Corp., is known for spotting undervalued issues.