If you take a walk through the corridors of Capitol Hill, you're likely to bump into a few millionaires along the way. More than half of the members of Congress have net worths over $1 million.
As you might expect, many representatives and senators are active investors. Senate Minority Leader Mitch McConnell is one of them. The Kentucky Republican can't stop buying shares of this former darling of Warren Buffett.
A stock Buffett used to like
The stock I'm referring to is Wells Fargo (WFC 0.34%). For years, the big bank ranked among Buffett's favorite stocks.
The Oracle of Omaha first bought shares of Wells Fargo for Berkshire Hathaway's portfolio in 1990. The bank stock was a big winner for Buffett and Berkshire throughout the years. Wells Fargo even looked like it might be a "forever stock" for Buffett.
However, when the bank's phony accounts scandal was exposed in 2016, Buffett didn't immediately exit his position in the stock. Over the next few years, though, he drastically reduced Berkshire's stake in Wells Fargo and eventually sold all remaining shares in 2022. Buffett publicly stated that Wells Fargo built "an incentive system that rewarded bad behavior."
Sen. McConnell's regular buying pattern
While Buffett was selling Berkshire's shares in Wells Fargo, Sen. McConnell was buying shares of the bank. The Kentucky senator has purchased shares of Wells Fargo like clockwork every quarter for years -- even when the big bank's scandals were routinely making headlines.
Why has McConnell invested so regularly in Wells Fargo? There's a simple explanation: dividend reinvestment. Every quarter, any dividends paid by the company are used to purchase additional shares.
However, while Sen. McConnell has reported these transactions, he wasn't the one buying Wells Fargo stock. His disclosures revealed the owner of the stock was his wife, Elaine Chao. She served as Secretary of Labor in the administration of former President George W. Bush and Secretary of Transportation during the Trump administration.
Should you buy Wells Fargo stock, too?
Things appear to be looking up for Wells Fargo. Its shares have jumped more than 40% over the last 12 months. The company has implemented new control measures to try to prevent the kind of issues that occurred in the past from happening again. A consent order was lifted in February 2024 -- a major milestone in Wells Fargo's goal to put the scandal behind it.
Is the stock a good pick again as it once was when Buffett was a big fan? I think income investors could find Wells Fargo attractive. The big bank offers a dividend yield of nearly 2.5%. Its dividend payout ratio is a low 28%, indicating plenty of flexibility to increase the payout in the future.
However, the potential of interest-rate cuts later this year could negatively impact Wells Fargo's interest income. The company's earnings fell year over year in the first quarter of 2024. Growth investors can find better stocks to buy right now.
