Wells Fargo
Company Overview
Wells Fargo is one of America's largest banks, headquartered in San Francisco and serving millions of consumer, commercial, and corporate customers. Berkshire's investment in Wells Fargo began in 1990 during a real estate-driven banking crisis — one of Buffett's most contrarian large investments — and the position was held for nearly 30 years before Berkshire substantially exited following the 2016 fake accounts scandal.
Investment Story
1990: The contrarian purchase. In 1990, Wells Fargo's stock had fallen roughly 50% from its highs amid fears that California real estate losses would devastate the bank. Analysts predicted potential insolvency. Buffett began buying aggressively at prices around $58-$80 per share, ultimately accumulating roughly 10% of the company for approximately $290 million. His thesis: even if Wells Fargo lost $500 million on bad loans (which he considered likely), its annual pre-tax, pre-provision earnings of $1 billion+ would cover those losses. The bank's underlying earnings power was intact.
1990–2015: Long-term compounding. Over 25 years, Wells Fargo grew from regional California bank to national powerhouse under CEO John Stumpf (preceded by Dick Kovacevich). The stock rose from Berkshire's purchase price to approximately $50+ per share (adjusted for splits), generating returns measured in the thousands of percentage points. Wells Fargo was consistently Berkshire's largest or second-largest equity holding.
2016: The fake accounts scandal. Wells Fargo disclosed that employees had created up to 3.5 million unauthorized accounts to meet aggressive cross-selling targets. The scandal implicated both the underlying culture and top management. Buffett, who had originally praised Stumpf publicly, was caught in a difficult position — his favorable commentary on management proved wrong. Berkshire began reducing the Wells Fargo position.
2019–2021: Full exit. Berkshire substantially exited its Wells Fargo position between 2019 and 2021, selling most of the stock at prices well below what further holding might have captured as Wells Fargo recovered. The exit ended a relationship that had generated enormous returns over three decades but ended uncomfortably.
Buffett's Own Words
The Washington Post Company ......... 9,731 342,097 5,000,000 Wells Fargo & Company ............... 289,431 289,375 Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings. The exception was Wells Fargo, a superbly-managed, high-return banking operation in which we increased our ownership to just under 10%, the most we can own without the approval of the Federal Reserve Board. About one-si
The Washington Post Company ... 14.6% 14.6% 11 10 Wells Fargo & Company ......... 11.5% 9.6% 16(2) (17)(2) -------- -------- -------- -------- Berkshire's share of undistributed earnings of major investees $298 $230 Hypothetical tax on these undistributed investee earnings (42) (30) Reported operating earnings of Berkshire 348 316
For example, See's, Wells Fargo and Freddie Mac could be hit hard. All in all, though, we can handle this aggregation of exposures. In this respect, as in others, we try to "reverse engineer" our future at Berkshire, bearing in mind Charlie's dictum: "All I want to know is where I'm going to die so I'll never go there." (Inverting really works: Try singing country western songs backwards and you will quickly regain your house, your car and your wife.) If we can't tolerate a possible consequen
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,595,180 Wells Fargo & Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,540 Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,683 5,135 Total Common Stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,044 $ 37,265 * Represents tax-basis cost which, in aggregate, is $1.5 billion less than GAAP cost. During the yea
*The Washington Post Company . . . . . . . . . . . . 18.3% Wells Fargo & Company . . . . . . . . . . . . . . . . . 3.6% Berkshire's share of undistributed earnings of major investees Hypothetical tax on these undistributed investee earnings (99) (3) Reported operating earnings of Berkshire 1,318 Total look-through earnings of Berkshire $ 1,926 (1) Does not include shares allocable to minority interests (2) Calculated on average ownership for the year (3) The tax rate used is 14%, which is *
Investment Lessons
Banking's unique risk: management culture is invisible until it fails catastrophically. Wells Fargo's branch employees were creating millions of fraudulent accounts for years before internal controls detected the pattern. The culture of aggressive cross-selling — which looked like competitive strength from the outside — was actually a systemic failure that management knew about and allowed to persist. This is the specific risk with banks: the culture that drives earnings growth and the culture that drives fraud look identical from an investor's vantage point until they don't.
Timing of first purchase and crisis premium pricing. The 1990 purchase during maximum California real estate panic illustrates classic Buffett methodology: a genuinely good bank (sound underwriting culture, strong earnings power) priced at maximum fear. The underlying business quality hadn't deteriorated; the stock price reflected temporary panic. Buying aggressively in this environment, with careful analysis of earnings power vs. loss exposure, produced exceptional long-term returns.
Even great long-term investments can end badly. Wells Fargo generated exceptional returns over 29 years, validating the original 1990 thesis completely. Yet the ending — a scandal that damaged reputation and regulatory standing — complicated a triumphant narrative. The lesson: even exceptional businesses can fail management quality tests over long enough time periods, and no holding period is truly permanent.