The Digest #35

Published on August 12, 2020

Did Buffett Sell Wells Fargo?

Berkshire Hathaway reported second quarter results over the weekend and I sent out a special issue of the newsletter on Sunday to discuss various aspects of the earnings release. The market seems to be reacting to the results positively, with Berkshire shares trading higher on Monday and Tuesday. 

One aspect of the report not discussed in the Sunday newsletter is the apparent sale of equity holdings in the “banks, insurance, and finance” category. As we can see from the exhibit below taken from the second quarter 10-Q report, Berkshire’s cost basis in the “banks, insurance, and finance” category has dropped from $40,419 million as of December 31, 2019 to $31,164 million as of June 30, 2020 (the figure was $40,845 million as of March 31, 2020 based on the first quarter 10-Q):

Regular readers of Berkshire’s financial statements will also note that Berkshire now lists the “big four” as American Express, Apple, Bank of America, and Coca-Cola.  In the first quarter, this note referred to five securities, not four, with Wells Fargo included in the list. This has led to speculation among Berkshire shareholders that Warren Buffett has sold Berkshire’s holdings in Wells Fargo.

Wells Fargo shares closed at $28.70 on March 31 and fell to $25.60 on June 30, trading between a high of $33.91 and a low of $22 during the quarter.

It is possible that a sale of part or all of the Wells Fargo stake accounts for part of the drop in the cost basis of the “banks, insurance, and finance” category. The following table from the 2019 annual report shows the cost basis of Wells Fargo as well as other large holdings:

Wells Fargo’s cost basis is roughly $7 billion, but Berkshire also has large holdings in other banks including BNY Mellon, JPMorgan Chase, and U.S. Bancorp. We know that Berkshire has added to its stake in Bank of America recently so the sales are obviously not a reduction in the BofA holding. 

Berkshire is expected to file its 13-F report with the SEC later this week which will show its equity holdings as of June 30, 2020. We will have to wait for that report to be released for definitive answers regarding what was sold in the “bank, insurance and finance” group during the second quarter. I recommend using the website to monitor the 13-F filings of Berkshire.

Going the Distance

Starting out too quickly in a marathon is a classic beginner’s error. The adrenaline rush of the starting line, a rested body, and watching others start off strong can conspire to accelerate your pace beyond the level that can be sustained. Exceeding your physical capacity at the start of a 26.2 mile race can have dire consequences toward the end. Decisions related to personal finance can resemble marathon running. To go the distance, you must pace yourself and ignore those who seem to be passing you by during the first few miles.  If you remain disciplined, chances are good that you will pass them later in the race.

Read Going the Distance on The Rational Walk

Interesting Links

Time for Thinking by Howard Marks, August 5, 2020. Marks surveys the current scene more than a month after his last memo, The Anatomy of a Rally, published on June 18. His latest memo covers the current state of the COVID pandemic, whether the economy is likely to experience a “V shaped recovery”, and the sustainability of the Federal Reserve’s current set of policies. (Oaktree)

Calpers CIO Resigns After Less Than Two Years, Missing Return Targets by Katrina Nicholas, August 5, 2020. Ben Meng resigned as chief investment officer of the California Public Employees Retirement System after less than two years in the role and less than two months after he published an article outlining his plan to invest in private equity and credit on a leveraged basis to meet the 7% return target the fund needs to satisfy obligations. (Bloomberg)

Doris Buffett, Her Family’s ‘Retail Philanthropist,’ Dies at 92 by Sam Roberts, August 4, 2020. “Her younger brother, Warren, entrusted her with vetting requests after he announced his intention to donate nearly his entire fortune. “Warren loves to make money and I love to give it away,” she said.” Doris Buffett ran the Sunshine Lady Foundation and, more recently, The Letters Foundation which she founded with her brother. (NY Times)

The Sweet Spot by Mr. Money Mustache, August 4, 2020. “Success can get you to the top of a beautiful cliff, but then propel you right over the edge of it.” Overachievers need to be careful to not go beyond the “sweet spot” where additional success can lead to a lower quality of life. (Mr. Money Mustache)

Do You Know the Difference Between Being Rich and Being Wealthy? by Jason Zweig, August 8, 2020.  Jason Zweig reviews The Psychology of Money, a book by Morgan Housel that will be released in September. I often link to Housel’s blog posts (see below) and plan to review his book in the fall. (WSJ)

What Always Changes by Morgan Housel, August 5, 2020. “Investment facts are always changing. But prediction is doubly hard because the facts investors care about and pay attention to – which is what makes facts relevant – change all the time. Not just by industry, but for the market as a whole.” (Collaborative Fund)

How Tim Cook Made Apple His Own by Tripp Mickle, August 8, 2020. “The industrial engineer has turned Steve Jobs’s creation into a corporate colossus, delivering one of the most lucrative business successions in history” (WSJ)

From Class Rooms to Class Zooms: Teaching during COVID times! by Aswath Damodaran, August 5, 2020. Professor Damodaran writes about teaching during the pandemic, the value proposition of higher education, and his efforts to provide free instructions to students online. (Musings on Markets)

The Value Guys Podcast July 20, 2020. I heard about The Value Guys when Geoff Gannon mentioned them on one of his recent Focused Compounding podcasts. The Value Guys are industry veterans who talk about stocks anonymously. Episode 308 is interesting because the first twenty minutes are devoted to explaining the grueling career path of Wall Street analysts. 

How to Have the Best Week Ever by Ryan Holiday, August 5, 2020. Holiday applies timeless wisdom from Marcus Aurelius, Seneca, Epictetus to help us improve each day of the upcoming week. (

Mount Corcoran by Albert Bierstadt

Mount Corcoran by Albert Bierstadt, c. 1876-1877 (National Gallery of Art)

According to the National Gallery of Art, Albert Bierstadt was the “first artist to use his European training to translate field studies into expansive paintings celebrating western American grandeur.” The peak he named Mount Corcoran is today known as Mount Langley, located at 14,032 feet in the Southern Sierra Nevada mountain range of California. The painting was initially met with a hostile reception when it was displayed in 1877. Apparently many on the east coast who saw it didn’t think the scene could be one based on a real mountain. 

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The Digest #35