WARREN BUFFETT Quote : Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.
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Sunday, May 17, 2009

Buffett’s Berkshire Boosted Wells Fargo Stake as Shares Fell

By Erik Holm

May 16 (Bloomberg) -- Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. added to holdings of lenders Wells Fargo & Co and U.S. Bancorp in the first quarter as the shares traded at their lowest prices in more than a decade.

Buffett’s firm, the largest shareholder in San Francisco- based Wells Fargo, increased its stake in the bank by about 4.3 percent in the first quarter to 302.6 million shares, Berkshire said in a regulatory filing yesterday disclosing its U.S. stock portfolio as of March 31. Omaha, Nebraska-based Berkshire increased its holding of U.S. Bancorp by about 2.2 percent.

Banks that attract deposits at low rates were undervalued in the first quarter because investors wrongly believed that the entire industry was hobbled by risky bets and reckless lending, Buffett said at Berkshire’s annual meeting earlier this month. The KBW Bank Index fell 37 percent in the first quarter.

“All banks aren’t alike by a long shot, and in our view Wells Fargo, among the large banks, has some advantages the others do not,” said Buffett, Berkshire’s chief executive officer and chairman, at the company’s May 2 annual meeting.

Wells Fargo shares closed at $24.87 yesterday on the New York Stock Exchange after falling below $9 in March. Buffett said he was speaking to a class the day the shares dropped that low and told students that, at such a price, “If I had to put all of my net worth into stock, that would be the stock.”

‘Where His Mouth Is’

Buffett is “putting his money where his mouth is,” said Gerald Martin, a finance professor at American University’s Kogod School of Business in Washington who has studied Berkshire’s investing history. “I don’t think he’s ever been this transparent about what he’s doing.”

Known as the “Oracle of Omaha,” Buffett has become a cult figure among investors, drawing a record 35,000 people for the firm’s shareholders meeting this year. Mutual funds and individuals mimic the stock picks to duplicate Buffett’s success, and a study co-authored by Martin in 2007 found that using this strategy for 31 years would have delivered annualized returns of about 25 percent, double the Standard & Poor’s 500.

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